Reliance Targets 20% More In Bses

Reliance Industries on Friday made an open offer for a 20 per cent stake in power generation and distribution major BSES at Rs 234 a share.

This will make Reliance the largest private sector power producing group in the country. It is currently the single-largest shareholder group in BSES with a holding of 14.82 per cent against 35 per cent held collectively by financial institutions.

The floating stock in the company is just around 13 per cent, significantly below what Reliance plans to mop up from the market. The open offer, which could lead to an outgo of Rs 650 crore, is likely to open in June 2000.

 

The BSES scrip closed 1.64 per cent lower on the Bombay Stock Exchange at Rs 255 yesterday against a book value of Rs 140 per share.

The open offer, through the group flagship, and a wholly-owned subsidiary Reliance Power Ventures, will be funded through internal accruals, a Reliance press release said.

Company sources said RIL had a cash balance of around Rs 3,000 crore. Its cash accruals last year amounted to Rs 4,000 crore.

The offer to minority shareholders is mandatory under the Sebi guidelines as Reliance cannot exceed the 15 per cent limit without making a mandatory open offer.

RIL's advisors to the offer JM Morgan Stanley chairman Nimesh Kampani said, "Even if the offer is undersubscribed, Reliance will be able to hike its stake by 5 per cent annually."

The offer will now see Reliance get the "promoter" tag, which will enable the group to hike its stake every year through creeping acquisitions.

Commenting on the move, Anil D Ambani, managing director, Reliance Industries, said, "This represents a strategic step in our pursuit of growth opportunities in power.

"We believe this step is in the best interest of both the companies and will significantly contribute to enhancement of overall shareholder value for shareholders," he added.

Now, Reliance will have access to the entire range of BSES activities ranging from generation (500 mw) and distribution in Orissa and in Mumbai, besides its plans to participate in the privatisation of state electricity boards.

BSES, through BSES Telecom, also has major plans in providing broadband Internet access and has been scouting around for equity stakes in portals, while Reliance is also funding IT start-ups and has acquired an Internet Service Provider licence. The Rs 2,349 crore BSES is doubling its Dahanu power unit to 1000 mw by setting up another plant at Saphale in the state. It has a further 1000 mw under construction. It is also the largest power distribution company in India and holds the sub-licence for distributing power in different regions of Mumbai. Last year it also bagged the distribution rights for three of the four circles in Orissa for distributing power.

The Reliance group already has captive generation of 800 mw at its plants in Patalganga, Narora and Hazira and Jamnagar. Reliance's total projects under development aggregates to 6000 MW..