Reliance announces RPL Amalgamation into RIL Ratio at 16:1…What should RPL and RIL Shareholders do?
On Friday,after Markets closing,RPL and RIL announced that their Boards would meet this morning to consider and recommend the Amalgamation of RPL into RIL
I had blogged that the ratio could be 20:1 and the Amalgamation would add incremental EPS to RIL and help RIL Share Price to be maintained or enhanced
The Amalgamation Ratio has just been announced this morning at a better 16:1 and it’s already in the share prices…RIL is marginally lower at Rs 1235 and RPL is virtually unchanged at Rs 76
RIL has been justifying this amalgamation largely for operational efficiencies and enhancement of shareholder value…They say it will be tax neutral…My blog had emphasised that clearly the Amalgamation was an effort to maintain/enhance RIL Share Price in these tough times as there would be incremental EPS accretion and a very marginal dilution of Equity
Times are tough for Global Refiners and Gross Refining Margins are abysmal…In the near term 2009/10 I don’t see any recovery
Projected EPS for FY 10 is Rs 140 for RIL post amalagamation as KG Gas and RPL is expected to l add the incremental EPS…Otherwise the EPS would have struggled to top even Rs 90 in FY 10……I have reservations on this Projections of an EPS of Rs 140
I also see a deepening Global Crisis and the Dow sinking to more Lows…In this scenario I see RIL moving below Rs 1000
So what should RIL and RPL Shareholders do Now….All depends on your View of Markets and Reliance in the Near and Long Term…A few strategies are advised below for those who hold both RPL and RIL in their Equity Portfolio
A BULLISH VIEW IN THE NEAR TERM ( 2009) AND LONG TERM (2011)
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Retain your holdings in RPL and RIL
A BEARISH NEAR TERM VIEW BUT A BULLISH LONG TERM VIEW