Reliance Industrial Infrastructure – What is game?

By | April 13, 2009

Reliance Industrial Infrastructure Ltd (RIIL) share price has been moving up and had risen from Rs. 318 on 2nd April to Rs. 820 on 9th April. In three trading sessions, a rise of 158%. On Thursday, 9th April, it had a turnover of 105 lakh shares on NSE and 50 lakh shares on BSE which has surpassed the present paid up equity of the company, which is at 151 lakh shares. Obviously, delivery percentage has been very low at just 3%.

So why this sudden jump in the share price? Though Reliance Industries has denied merger of RIIL with itself, it has a different angle.

If one may recall, share price of RIIL in August 07 was ruling at Rs. 500 per share which rose to Rs. 3,200, one way, by October 07. At that time, people close to the management, as also, ex- promoter of the company, being Anand Jain, along with Reliance Industries Ltd (RIL), being the present promoters, sold over 20 lakh shares of the company. If we presume that all the shares were got sold at an average of Rs. 3,000 per share and now having bought them back , at an average of Rs 500 per share, this gave them a gain of close to Rs. 500 crores. Remember, RIL sold about 4.62% stake of Reliance Petroleum, during that time and made a gain of Rs. 4,733 crores .RIL became promoter of RIIL in March 06, though RIL has been holding 46% stake in RIIL, much prior to that .

However, it is learnt that RIL is planning to make RIIL as a gas carrier & distribution company. Reliance Gas Transportation Infrastructure Ltd. (RGTIL) is a closely held company of Mukesh Ambani, which had put up 1,400 kms., 48 inches diameter pipeline from Kakinada to Bharuch, capable to transport 120 mmscmd of gas , having set at a project cost of Rs. 15,000 crores. The present paid up equity of RGTIL is at Rs. 700.05 crores with face value of Re.1 and are presently held by 6 private limited companies, with each company holding 1166.75 million shares. In addition to this, it has Preference Share Capital of Rs. 330 crores, with face value of Rs. 10 each. This company is capable to generate a revenue of Rs. 700 crores, if we presume a transport of 80 mmscmd at US$ 0.13 per mBtu.

Apart from this, RIL has plans to set up gas pipelines in various parts of the country, originating from KG Basin, as also to take up gas distribution for domestic households in over 150 cities, of the country.

It is learnt that the Group is contemplating to bring all this pipeline network and business into RIIL, with a view to attain leadership in the sector. This move was also expected in the past, but got deferred due to delay in gas production by RIL from KG Basin.

Maybe now, if this gets implemented, RIIL paid up equity, which is now at Rs. 15.10 crores may get raised to Rs. 100 crores with promoters’ holding of 90%, which is allowed for an infrastructure company. The whole exercise is aimed with a view to raise US$ 2 Billion for new projects. This will be possible only if RIIL has a mega size of projects coupled with respectable market capitalisation.

RIIL has a market cap of Rs. 1,240 crores, inspite of recent surge in the share price, which is not befitting to the level of RIL Group. So, if these plans are required to get implemented. RIIL must become a $4 billion company in terms of size of assets and market capitalisation.

We hope that these expected plans are implemented by the Group this time for RIIL and not to indulge in market operations again.

By SP Tulsian

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