Rs 8100 Cr Investment In Infocomm Beneficial: Ril

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Rs 8100 Cr Investment In Infocomm Beneficial: Ril

http://economictimes.indiatimes.com/articleshow/947535.cms

SANJEEV SHARMA

NEW DELHI: Reacting for the first time to the row over the ownership and funding of Reliance Infocomm, parent company Reliance Industries has stated that if and when it decides to convert its preference shares to equity, its holding in RIC can exceed 45%.

RIL, in a communication sent to ET said: “As and when RIC issues further capital, commensurate with its needs, the holding of the original investors can get diluted.” This would indicate that Mukesh Ambani’s holdings in the company which stand at 55% currently may come down in the future when the company raises additional capital.

RIL’s communication comes in response to the ownership issues surrounding Reliance Infocomm and questions being raised on funding by the parent through the preference share route and returns on the same.

In the communication, RIL has stated that it holds 45% of the equity of Reliance Communications Infrastructure (RCIL). RCIL is the holding company of Reliance Infocomm (RIC), with 65% of its equity.

RIL has Rs 8,100 crore worth preference shares in RIC with the full option of conversion. They have an issue price of Rs 50 per share, a face value of Re 1 per share, tax free dividend of 10%, ten-year period for redemption and no lock-in period for conversion to equity, the communication says.

Seeking to defend its investments in Reliance Infocomm through the preference share route, the RIL statement says: “Preference share is a very popular financial instrument all over the world. It ensures upside in equity and protects downside through the option of redemption.

Recourse to preference shares was taken in the case of RIC, commensurate with the gestation period of the project. RIL stands to gain from tax-free dividends as well as from premium on redemption price or conversion of equity, as the case may be,” the communication says.

Explaining the returns on preference shares of Infocomm, the communication said: “The instrument has a tax-free long-term yield of 8% per annum, which is very good considering the interest rates in the country. The actual returns to RIL would depend on the conversion price, determined by independent valuers at the time RIL decides to exercise its option for conversion.”

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Ril's Holding In Infocomm Can Exceed 45%

http://economictimes.indiatimes.com/articleshow/947018.cms

MUMBAI: Amid ongoing tussle over ownership issues between Ambani brothers, Reliance Industries Ltd on Sunday said its investment in Reliance Infocomm Ltd's preference shares worth Rs 8,100 crore is beneficial since the 10-year instrument provides a good 10 per cent dividend with benefit of upside, if converted into equity shares.

Recourse to preference shares was taken in the case of RIC taking into account the gestation period of the project. RIL stands to gain from tax-free dividends and premium on redemption price or conversion to equity, as the case may be, RIL said in a statement here.

RIL holds 45 per cent of the equity of Reliance Communications Infrastructure Limited (RCIL). RCIL is the holding company of Reliance Infocomm Limited with 65 per cent of its equity, it said.

The statement comes in the wake of media reports on investments by RIL in telecom business run through Reliance Infocomm.

RIL has invested Rs 8,100 crore worth preference shares of RIC with the full option of conversion. These preference shares were issued at an issue price of Rs 50 per share (face value of Re one per share), it added.

The preference shares carry a tax free 10 per cent dividend with ten-year period for redemption and do not carry any lock-in period for conversion to equity.

The instrument has a tax-free long-term yield of eight per cent per annum, which is very good considering the interest rates in the country.

The actual returns to RIL would depend on the conversion price, determined by independent valuers at the time RIL decides to exercise its option for conversion.

It ensures upside in equity and protects downside through the option of redemption, it added.

Edited December 7, 2004 by Chirag