Reliance To Hike Stake In Rpl By 2 Per Cent

The Rs 8,730 crore Reliance Industries has announced that its stake in the group company, Reliance Petroleum Ltd (RPL), will go up by more than two per cent following the allotment of the 14 per cent, optionally full convertible debentures (OFCD) to be issued by Reliance Petroleum. RIL's current stake in the company is around 22 per cent.

The OFCD issue will part-finance RPL's upcoming refinery at Jamnagar, Gujarat. Last October, the RPL board had cleared the preferential issue of OFCDs to fund the incremental cost of its proposed 15 million tonne refinery. The refinery is slated to be commissioned in 1999.

The refinery cost shot up primarily due to the depreciation of the rupee. The cost of setting up the refinery rose from Rs 8,694 crore (estimated in 1995-96) to Rs 9,236 crore. This is expected to further escalate to Rs 10, 500 crore following the recent rupee devaluation.

By subscribing to this preferential issue, RIL is expected to directly fund the incremental cost of the refinery.

Out of the expected cost of Rs 9,236 crore, Reliance Petroleum has already tied up funds for Rs 6,934 crore. It had also made a domestic public offering of Rs 2,172 crore in 1993. This was followed by a $100 million convertible bond issue (in 1996-97), and a syndicated loan of $300 million without any guarantee.

Within the integrated grassroot refinery complex, RPL also intends to set up a 1,000 mw power plant based on petroleum coke, a refinery by product. Almost 40 per cent of the refinery's product is expected to be the feedstock for Reliances petrochemical units at Hazira. For the remaining products, Reliance has entered into a marketing contract with Indian Oil Corporation.

With the preferential allotment, RPL would have completed most of the financing for the refinery except for another public issue which will be timed to coincide with the commissioning of the refinery.