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With signs of green shoots showing in economies worldwide, India  Inc’s appetite for overseas acquisitions got a fresh lease of life with Reliance Industries’ estimated $10-12 billion offer for a controlling interest in bankrupt LyondellBasell Industries.

The deal by India’s largest private sector company controlled by Mukesh Ambani, if closed, will make it one of the largest petrochemical outfits in the world. It will also be the second largest overseas acquisition by an Indian company, after Tata Steel bought Corus for $13 billion in 2007.

RIL has enough money power to make the deal happen. It has $4 billion in cash and $8 billion in treasury stocks, besides a favourable 0.35:1 debt-equity ratio. It also raised $660 million through treasury stocks sale recently.

In the year to October, Indian comanies acquired overseas assets worth $586 million, a sharp fall from the $13.06 billion in the same period a year ago, according to data from Grant Thornton Deal Tracker.

HSBC believes outbound activity will bounce back. About 70 per cent of HSBC’s pipeline is outbound transactions, which has remained the same as the previous year’s.

Tarun Kataria, managing director and head of corporate, investment banking and markets at HSBC, says India is sitting on the cusp of rapidly growing cross-border M&A activity.

“Indian firms are now well capitalised, are trading at circa 20x multiples, offshore markets are trading at a discount to India and financing is more readily available to Indian corporates than to competing offshore acquirers.”

Rest of the news here

I was thinking that it would be a 1:22 or 1:24 share swap.  That was going to be too much of a loss for me.  1:16 is not bad considering that my average price for RPL is quite ok.  So, over a period of few months the merger will be through and i will be holding the shares of Reliance Industries. A much better opportunity moving towards a more diversified company from a company with interests in just refining.

Was it unexpected? Not really.  For anyone who has knowledge of the past record of Reliance Industries, they have always done this.  Merging their subsidiaries with the parent company.  The only thing i was worried about was the merger ratio.  That’s why i kept buying the RPL stock when it was below 100 rupees only.

Reliance Industries Ltd (RIL), India’s largest company by market capitalisation, has offered one share for every 16 held in Reliance Petroleum (RPL) to merge its refinery subsidiary.  RIL will issue 69.2 million new shares to shareholders of RPL in order to buy back the company and will have 3.7 million shareholders after the merger. RIL’s equity capital will rise to Rs 1,643 crore and the promoter’s holdings will fall by 2 per cent to 47 per cent, the company said in a statement issued today.

Alok Agarwal, RIL’s chief financial officer, told reporters here today that no fresh treasury stock would be created and the parent’s holding in the petroleum unit would be cancelled. Almost 200 million existing treasury shares would continue, he added.

RIL’s absorption of RPL will be tax neutral for both the entities. “This merger is not about tax benefits. As far as taxation is concerned, the SEZ refinery is a separate undertaking. Both refineries will retain their tax benefits,” Agarwal said.

“This is about size, this is about diversification,” Agarwal said, adding the merger would give RIL the ability to take on projects much larger than done before.  RIL has set April 1, 2008 for the date of the amalgamation. The takeover is subject to approvals by the high courts at Mumbai and Ahmedabad.

Full article here.

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In 2014, the Hinduja group turns 100 years. The group, which has estimated worldwide revenues of $10 billion, with some 35 per cent of those coming out of India, wants to usher in the 100th year in style. The group is looking for some big ticket investments in Oil & Gas, Power, Infrastructure, Real Estate, Telecom & Healthcare.

If all these projects pan out, the Hindujas would end up pumping over $50 billion into the country or even more. The Hinduja group owns Ashok Leyland, Ennore Foundaries, Gulf Oil Corporation, HTMT Global Solutions and IndusInd Bank.

The Hindujas had made a bid of $20 billion when Hutch was put up for sale. But they were pipped at the end by Vodafone. Not wanting to miss out on the India growth story, they want to invest more than $50 billion which could even go upto $100 billion by the time the company hits a century.

Read a detailed article in Business Today about the Hinduja’s multi billion gamble.

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Reliance Industries and Essar Oil , India’s largest private sector oil refiners, are set to create the world’s biggest petroleum refining hub as part of plans to expand their plants in Jamnagar, western India. Essar has announced a $6bn expansion plan to more than triple capacity at its refinery, while Reliance, at its site a few kilometres away, is working on plans to almost double capacity.

The expansion projects will bring their combined refining capacity at Jamnagar to 1.9m barrels a day, the largest in the world in a single location, outstripping hubs such as Rotterdam and Singapore and those in China and South Korea, according to figures compiled by Fesharaki Associates Consulting and Technical Services, Singapore.

An FCC regenerator being prepared for erection at the Reliance Petrochemical Complex in Jamnagar

Under their plans, Essar announced it was lifting capacity at its plant to 700,000 b/d by 2010 from 220,000 b/d. Reliance is in the middle of a $6bn investment to expand capacity to 1.24m b/d from 660,000 b/d by next year. Once the expansion works are complete, the nearest comparable hub will be South Korea’s Ulsan at 1.35m b/d, Facts said.

Prashant Ruia, Essar group director, said the total development cost of the refinery including the expansion would be $9bn, which analysts consider extremely cheap against the global average of about $13bn-$15bn for the same size plant.

Full article here.

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