Reliance Petroleum Ltd (RPL) is hiking its authorised capital by Rs 2,000 crore to enable the company to offer equity shares against the forthcoming conversion of the triple option convertible debentures (TOCD).
The company will seek shareholder approval for the hike at its extraordinary general meeting scheduled on April 15 in Jamnagar. RPL's current equity is Rs 864.09 crore, and its authorised capital is Rs 5,000 crore.
Last week, RPL had announced a new conversion option for its TOCD holders under which they have the option to surrender the instrument and get three RPL shares in turn at a price of Rs 10 each.
When issued in 1993, the TOCD of Rs 60 was convertible into two equity shares of Rs 20. The remaining portion of the TOCD was non-convertible, and was to have been redeemed in three instalments beginning November, 1999.
RPL had also issued convertible warrants along with the TOCDs in May, 1997, to be converted into two equity shares of Rs 20 each.
Now, RPL has offered a conversion option to the TOCD holder, and has fixed April 25 as the record date.
The conversion option will be open for one month from May this year. RPL executives said the conversion is only an option for the investors, and is an opportunity to participate in the future growth of the company.
The TOCD holder, if he converts fully, can ultimately get five equity shares at an average price of Rs 12 per share as against the earlier option of four equity shares at an average price of Rs 15 per share, said RPL sources.
If he decides to convert the warrants as well, he will then get seven equity shares at an average price of Rs 14 per share, sources added.
Two equity shares of Rs 20 have already been allotted to the TOCD holder after allotment in 1993.
Market sources, however, say the exercise is a clever move by RPL to rid itself of its debt burden on the triple option convertible debentures estimated at Rs 800 crore annually.
If the non-convertible portion of the TOCDs are to be redeemed as per schedule, the company could have to fork out Rs 1,800 crore at Rs 40 per debenture.
RPL sources said the debt burden is not a problem for the company.
Our debt-equity ratio is 0.8:1 now, and if full conversion takes place, it would fall to 0.5:1. Many projects are coming up with a ratio of 1:1, sources added.
The annual outflow of Rs 800 crore is not a problem, they added.
At present, RIL holds 39 per cent, financial institutions 15 per cent, foreign currency convertible bond holders 8-9 per cent and public 35 per cent in RPL.
If all the TOCD and warrant holders convert, the company's equity would rise by Rs 1374.6 crore.
