Sadhu Vaswani Institute of Management Studies For Girls, Pune

SADHU VASWANI INSTITUTE OF
MANAGEMENT STUDIES FOR GIRLS, PUNE
NAME: Mariya Iqbal Pithawala

ROLL NO.: 18114
CLASS: MBA PART II
SUBJECT: 309 FIN, Corporate Finance
SUBJECT TEACHER: Ms. Vaishali Patil.
Assignment 4
DATE OF SUBMISSION:
Report on Corporate Restructuring of Reliance Industries Ltd.
Reliance Industries Ltd. is India's largest private-sector company, generating revenues of $19.97
billion, or more than 3 percent of India's total gross domestic product. Founded as a textiles
company, Reliance has successfully completed a backward integration strategy that has
transformed it into India's largest private-sector petrochemicals company, and number two
overall (behind state-owned India Oil). Reliance's petrochemicals division is fully integrated and
includes exploration and production; refining (the company has built one of the world's largest
and most modern refinery complexes at Jamnagar in Gujarat); marketing, through a chain of
more than 1,000 service stations; and the production of petrochemicals, including polymers,
polyester, polyester intermediates, and others. These chemicals are used to support Reliance's
continued textile operations, which focus particularly on the production of polyester fabrics.
Following the 2004 acquisition of Trevira, the company has become the world's leading
polyester manufacturer, with production levels topping 25 million meters per year. The
company's textile range includes other fabrics, such as acrylics, and finished garments.
Reliance Industries represents the continuation of India's greatest corporate success story since
the country's independence. Founded by Dhirubhai H. Ambani in 1958, Reliance grew to include
holdings in energy production and distribution, telecommunications, and capital finance. After a
public feud between Mukesh D. Ambani and younger brother Anil, these operations were split
off into a new company controlled by Anil Ambani. Reliance Industries is listed on the Mumbai
Stock Exchange. Mukesh Ambani is company chairman and managing director.
Restructuring of Reliance Industries Limited (RIL) Background:
In the current scenario restructuring has become the need of the hour for any organization to
survive. However, this paper has tried to study the corporate restructuring of one Indian company
which immensely enhanced the shareholders’ market value and fortified their aggressive edge in
recent times i.e Reliance Industries Limited (RIL).For example, the acquisition, merger, and
demerger of Reliance Industries Ltd. like their acquisition of IPCL mergers of Reliance
Petrochemicals Ltd., and the recent demergers of four entities like Reliance Communication
Ventures Ltd., Reliance Energy Ventures Ltd., Re-liance Natural Resources Ventures Ltd., and
Reliance Capital Ventures Ltd. which spun off from Reliance Industries Ltd. (RIL), and were
perhaps the most well-known restructurings in current times. RIL forayed into the telecom sector
in the year 2000. The company also applied for open offers to take control of BSES stocks and
took over BSES in 2002. It also intended to combine its finance company with another
subsidiary Reliance Petrochemicals Ltd. (RPL). In March 2002, RPL amalgamated with RIL.
RIL also bagged a 25 percent share of IPCL in the same year. After the RIL patriarch Dhirubai
Ambani passed away ,RIL branched out further into the areas of biotech, life sciences, mining,
and insurance.
1. Division of Reliance:
RIL split in June 2005 due to issues between the two successors. The RIL struggle was not only
a conflict of titans, but it was also about wealth in the area of Rs.1000 billion which was not
uncomplicated to distribute. On January 17 th 2006, a unique trading and investment era was
over. The demerger permitted by RIL board in August 2005, both brothers, Mukesh and Anil–
directed different businesses and five listed companies emerged as potential investment
opportunities for investors by March 2006. Among the group companies of RIL, Reliance
Energy and Reliance Capital, were already listed at the exchanges. The remaining four
companies were listed by the end of March 2006.
2. Current Structure
The new RIL structure gave Mukesh absolute independent control in the business of oil
exploration, refining, petrochemicals, and textile businesses through a standalone entity in RIL
along with IPCL. His shares also included biotech firm Reliance Life Sciences and Trevira, a
company in Europe which manufactures polyester fibers. Anil got control over power,
communication, and financial businesses through four companies which came under Anil
Dhirubhai Ambani Enterprise (ADAE) as part of the Reliance group. These four com-panies
were named as Reliance Capital Ventures Ltd. (pro-posed to be merged with another listed
company Reliance Capital Ltd.), Reliance Energy Ventures Ltd. (proposed to be merged with
existing company Reliance Energy Ltd.), Reliance Communication Ventures Ltd.(these include
both Reliance Infocomm and Reliance Telecom) and Reliance Natural Resources Ltd. (which
includes businesses in gas based energy undertakings).
3. Impact of the Demerger
Share prices of the listed five companies were cited differently at the Bombay Stock Exchange
and National Stock Exchange after the Demerger. Before the split, RIL’s share was traded
around Rs 978 per share, but after the demerger the united demerged share values of five
companies came to around Rs. 1235. This was a increase of nearly 26 percent for each
shareholder. Long term aspect of the demerger sill needs to studied.
Conclusion
Corporate Restructuring has become very popular over the years especially during the last two
decades owing to rapid changes that have taken place in the industry.Business firms now have to
face greater than before opposition not only from Companies domestically but also from
worldwide business groups, thanks to globalization, liberalization, technological updation , etc.
The objective of Corporate Restructuring is Shareholder wealth maximization by in quest of
growth in terms of synergy, economies of scale, enhanced financial and marketing benefits,
diversification and concentrated earnings instability, superior inventory organization, boost in
domestic market share and also to attain rapidly increasing global markets. But astoundingly,
though the number and value of Corporate Restructuring are on the rise , the effects of the
studies on the impact of mergers on the performance from the acquirers’ shareholders viewpoint
has not been very good .Thorough reformation scheduling as well as carrying out appropriate
due diligence, effectual communication during the combination, unswerving and skilled
leadership, speediness with which the integration plan is integrated all this overlay for the
accomplishment of Corporate Restructuring. While making the Restructuring deals, it is essential
not only to make examination of the monetary aspects of the acquiring company but also the
cultural and manpower issues of both the concerns for suitable post-acquisition integration.

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SADHU VASWANI INSTITUTE OF

MANAGEMENT STUDIES FOR GIRLS, PUNE

NAME: Mariya Iqbal Pithawala

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