Shareholder interest not hurt, says RIL

Associate firms raised money from Reliance Ventures, to acquire Reliance Petro shares.

Reliance Industries Ltd (RIL) today refuted allegations that four of its associate companies acquired its shares in a manner that the economic benefits of this holding accrued to the promoters, and not to its shareholders.

"Economic benefits of RIL shares held by these four companies have always been for the benefit of RIL shareholders and remain so. This fact has been reiterated by RIL a number of times," RIL said in a media statement.

The statement was in response to reports that referred to financial transactions in which RIL lent money to four associate companies, mostly without interest, and on easy repayment terms. The associates, according to these reports, had the right to convert the loans into equity, but RIL had no such option.

The four associate companies "" Reliance Polyolefins, Reliance Aromatics and Petrochemicals, Reliance Energy and Project Development, and Reliance Chemicals "" used the money lent by RIL to buy shares in Reliance Petroleum.

After the petroleum company's merger with Reliance Industries, the associates owned 4.7 per cent of Reliance Industries' stock, now valued at Rs 3,500 crore.

According to sources in the office of RIL Chairman and Managing Director Mukesh Ambani, these associate companies had actually raised Rs 2,225 crore from Reliance Ventures, which is a wholly owned subsidiary of RIL, to acquire Reliance Petroleum shares.

Responding to a Business Standard query, the sources reiterated that the RIL shareholders' interest had not been jeopardised by these actions of the company, as alleged in recent times.

Specifically, these sources said Rs 870 crore of loans (zero-coupon optionally convertible loans) provided to the four companies by Reliance Ventures could be converted into equity at par, at the option of the lender (Reliance Ventures) after giving a notice of three months.

If and when Reliance Ventures opts to convert these loans into equity, it will hold a 99.99 per cent stake in each of these four companies. "It can be seen that due care has been taken to safeguard the interest of RIL and its shareholders," the sources added.

These four companies raised another Rs 1,355 crore from Reliance Ventures through zero-coupon optionally fully convertible debentures, where the option to convert into equity lay with the issuer (the four associate companies), the sources conceded.

Responding to the second issue of classification of these four companies within the "persons acting in concert" category, the sources said, "These companies were shown as 'persons acting in concert' with the promoters even when they held shares of Reliance Petroleum. After the merger, they continued to be clubbed under the same category."