Financial Daily from THE HINDU group of publications
Tuesday, Dec 28, 2004
Info-Tech - Telecommunications
Panel to consider RIL share conversion in Infocomm
Mumbai , Dec. 27
A DECISION by Reliance Industries board on Monday to examine the exercise of the company's option to convert its redeemable preference shares in Reliance Infocomm (RIC) could lead to the increase of RIL's stake in the latter.
The Board today decided to constitute a committee to consider all matters pertaining to exercise of the company's option to convert 162 crore cumulative convertible/redeemable preference shares of total value of Rs 8,100 crore, according to a statement from RIL on the Board's decisions on the group's telecom ventures.
The Committee, which will decide on the conversion, will consist of the six present independent Directors of RIL. "It will also consider appointing one or more valuers of international repute to determine the fair value of the equity shares of Reliance Infocomm Ltd," said the RIL statement.
The Board today also noted the annulment of the exercise of the option by the RIL Chairman, Mr Mukesh Ambani, with respect to 50 crore shares in RIC.
Currently, RIL's effective holding in RIC is 42.35 per cent, said the statement. RIL directly owns 7.57 per cent of the equity capital in RIC (Rs 31.5 crore) and 45 per cent of the equity capital in Reliance Communications Infrastructure Ltd (RCIL), said the statement. (RCIL holds 77.29 per cent of RIC's equity capital).
RIL has invested Rs 12,062 crore in its infocomm initiatives, said the statement. Apart from the above-mentioned equity investments, this amount also consists of Rs 1,600 crore investment in deep discount bonds of RCIL, redeemable in September 2011, with a put and call option every year on September 1 from 2006 onwards; and investment in cumulative convertible/redeemable preference shares in RIC of Rs 8,100 crore.
Mr Y.P. Trivedi and Mr M.P. Modi, representing RIL, have been nominated independent directors on the boards of RCIL and RIC, respectively, said the release.
The Board of RIL today also affirmed "noting and placing on record the position of receivables of Rs 3,426 crore of Smart Entrepreneurs solution Pvt Ltd, investment of Smart in Oil & Natural Gas Corporation's and other IPOs from its own resources," said the statement. "RCIL has 100 per cent effective ownership of Smart and Smart has already received Rs 2,079 crore of its total receivables, with the balance due over the next 20 months."
RIC has raised rupee term loans of Rs 4,725 crore and foreign currency loan of $344 million at rates lower than the yield on preference shares issued to RIL, and without any guarantee from RIL, said the statement.
The Board also reaffirmed the signing of a loan agreement by RIC with the US Exim Bank and Export Development, Canada, for $750 million without any guarantee or comfort letter from RIL and its sovereign pricing.
This is a demonstration of the faith and confidence of international lenders in RIC's project, said the statement.
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