Reliance plans to acquire remaining petroleum unit
Sunday, 1 March 2009
MUMBAI, Feb 28 (Bloomberg): Reliance Industries Limited, owner of the world's largest refining complex, plans to acquire the remaining shares of unit Reliance Petroleum Limited, after the stock dropped 54 per cent in the past year.
Chevron Corporation will sell its 5.0 per cent Reliance Petroleum stake to Reliance Industries, the Indian company said in a release issued in Mumbai today.
Directors will consider the plan on March 2, Mumbai-based Reliance Industries said in a statement to the Bombay Stock Exchange today. Reliance Industries holds a 70 per cent stake in Reliance Petroleum, according to data compiled by Bloomberg.
Reliance Petroleum started a 580,000-barrel-a-day refinery in December at a time of excess industry capacity and declining earnings from processing oil because of a slump in global demand for gasoline and diesel.
The new plant is adjacent to its parent's 660,000-barrel-a-day refinery at Jamnagar in Gujarat.
"Reliance Industries' margins are already under pressure and Reliance Petroleum will add to this," said Vinay Nair, an analyst at Khandwala Securities Limited, who has a "buy" recommendation on the parent company's stock. "Reliance Industries shareholders are likely to be disappointed."
Reliance Industries is currently valued at US$40 billion, compared with $6.90 billion for its unit.
One Reliance Industries stock is worth the equivalent of 16 of its unit's shares, according to Bloomberg calculations. Reliance Industries didn't say how the proposed merger would take place.
Shares in Reliance Petroleum closed at 76.35 rupees in Mumbai. Reliance Industries shares declined 1.90 per cent to 1,266.05 rupees in Mumbai trading. The stock has fallen 51 per cent in the past year.
Reliance Industries and its refining unit had their stock price targets and earnings estimates cut by JPMorgan Chase & Company on February 18, which cited a faster-than-expected decline in global oil demand.
Chevron Corporation will sell its 5.0 per cent Reliance Petroleum stake to Reliance Industries, the Indian company said in a release issued in Mumbai today.
Directors will consider the plan on March 2, Mumbai-based Reliance Industries said in a statement to the Bombay Stock Exchange today. Reliance Industries holds a 70 per cent stake in Reliance Petroleum, according to data compiled by Bloomberg.
Reliance Petroleum started a 580,000-barrel-a-day refinery in December at a time of excess industry capacity and declining earnings from processing oil because of a slump in global demand for gasoline and diesel.
The new plant is adjacent to its parent's 660,000-barrel-a-day refinery at Jamnagar in Gujarat.
"Reliance Industries' margins are already under pressure and Reliance Petroleum will add to this," said Vinay Nair, an analyst at Khandwala Securities Limited, who has a "buy" recommendation on the parent company's stock. "Reliance Industries shareholders are likely to be disappointed."
Reliance Industries is currently valued at US$40 billion, compared with $6.90 billion for its unit.
One Reliance Industries stock is worth the equivalent of 16 of its unit's shares, according to Bloomberg calculations. Reliance Industries didn't say how the proposed merger would take place.
Shares in Reliance Petroleum closed at 76.35 rupees in Mumbai. Reliance Industries shares declined 1.90 per cent to 1,266.05 rupees in Mumbai trading. The stock has fallen 51 per cent in the past year.
Reliance Industries and its refining unit had their stock price targets and earnings estimates cut by JPMorgan Chase & Company on February 18, which cited a faster-than-expected decline in global oil demand.