Reliance Natural Resources Ltd. (RNRL) and Reliance Power Ltd. (RPower) agreed to merge in a share-swap deal of one RPower share for every four RNRL shares. The transaction is valued at as much as Rs 500 billion based on valuations by KPMG.
The merger may not be very positive because RNRL doesn’t bring much to RPower and it may only lead to a dilution of value. By merging the companies, RPower may be able to get gas through RNRL’s supply agreements without having to pay potential extra marketing margins.
RNRL’s shareholders will benefit from the proposed amalgamation by participating in future growth prospects of RPower’s diversified generation portfolio of 37,000 megawatts, and its substantial coal reserves in
RPower gained 3.4 percent to Rs 175.3 on July 2 while RNRL fell 1.5 percent to Rs 64. Clearly, the swap ratio favors RPower which can be looked upon for buying only as an arbitrage opportunity.
crackcrackCompany Name | CMP |
---|---|
NTPC | 333.30 |
Tata Power | 401.25 |
Power Grid Corp | 315.75 |
Adani Power | 498.45 |
Torrent Power | 1476.80 |
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