The Reliance Anil Dhirubhai Ambani Group (Reliance ADAG) will merge its group company Reliance Natural Resources Limited (RNRL) with another group company Reliance Power Limited (Reliance Power) in a more than Rs.50,000-crore, all-stock deal.
The Boards of Directors of both companies approved an exchange ratio of 1 equity share of Reliance Power for every 4 of RNRL. The ratio is based on the valuation made by audit firm KPMG.
“The Board of Directors of Reliance Power Limited and Reliance Natural Resources Limited approved a scheme for amalgamation of the two companies in an over Rs.50,000-crore ($11 billion) all-stock deal, subject to necessary approvals,” said a release from the Reliance ADAG here.
The Reliance ADAG has a net worth of more than Rs.64,000 crore, cash flows of Rs.13,000 crore and a net profit of Rs.8,400 crore. “Reliance Power and its shareholders, including Reliance Infrastructure Ltd., will derive substantial benefits from the proposed amalgamation,” the release said.
The Reliance ADAG said the merger would accelerate the implementation of Reliance Power's plans for creating more than 8,000 MW of gas-based power generation capacity. The gas would be supplied under the RNRL's Gas Supply Master Agreements with Reliance Industries Ltd (RIL).
Reliance Power would also benefit from the prospects for gas from the RNRL's Coal Bed Methane (CBM) blocks, comprising 45 per cent interest in four blocks with an acreage of 3,251 sq. km. and an estimated resources of 193 billion cubic metres; and a 10 per cent share in an oil and gas block in Mizoram, with an acreage of 3,619 sq. km. and a reserve potential of up to 28 billion cubic metres.
It also envisages reliability and cost efficiency for fuel supplies through the RNRL's coal supply logistics and shipping business; contribution from the RNRL's net worth of Rs.1,900 crore, leading to an increase in Reliance Power's net worth to more than Rs.16,000 crore; and a significant further enhancement of the Reliance Power's overall growth prospects.
The Reliance ADAG also believes that the RNRL's shareholders will benefit from the amalgamation by taking part in future growth prospects of Reliance Power's diversified generation portfolio of 37,000 MW, and its substantial coal reserves in India and abroad.
The scheme of amalgamation is subject to approval of the shareholders of the Reliance Power and the RNRL, the stock exchanges, the High Court of Judicature, Bombay, and all other requisite permissions.