Reliance eyes $880m via sale of trust shares

Petro Major May Sell 2-Cr Treasury Stock Today May Invest Proceeds In Oil Hunt, Foreign Assets  RELIANCE Industries on Thursday may raise as much as $880 million, or Rs 4,244 crore, selling its own shares which were in a trust so far, as the company may be planning to acquire a petroleum asset overseas taking advantage of fallen valuations, a source and a fund manager said, preferring anonymity. These transactions are likely to be executed Thursday morning through block deals as the exchanges open.      The company may also use the proceeds to invest in expanding oil exploration which may need around $3 billion, analysts said.      The company has mandated DSP Merrill Lynch and Citigroup to sell as many as one crore shares of India's largest listed company at Rs 2,125 per share on Thursday, a 2.7% discount to Wednesday's closing price, sources familiar with the matter said. The company retains the right to sell an additional one crore shares.      A Reliance Industries spokesman declined comment.      Petroleum Trust ended up owning shares in RIL after the company decided to monetise the shares it was getting out of a share-swap merger with Reliance Petroleum in 2002 instead of extinguishing them. The Trust holds 10.47 crore of RIL's shares, or 6.65% of RIL's capital, a part of which is being sold on Thursday. RIL set up for the second time a company with the name Reliance Petroleum and merged that too with itself in 2009, but decided to extinguish the shares arising out of the latest merger. Interestingly, the RIL stock closed at Rs 301 on April 1, 2002, when Reliance Petroleum was merged with RIL.Reliance Ind seen creating a war chest  "I FEEL that RIL is looking at a major acquisition globally, as there are many assets available abroad," said Shailesh Haribhakti, MD of Mumbai-based consultancy firm Haribhakti & Co.      A fund manager also echoed Mr Haribhakti's view. "RIL is gearing up for $9-billion acquisition abroad," the fund manager, who did not want to be identified, said. The acquisition theory is gaining ground since the company does not need cash now, an analyst said.      "This one-crore share sale is only the first tranche,'' said investment advisor SP Tulsian. "Why the company needs so much of funds is still a mystery, as Rs 15,000 crore from the warrants conversion last year is lying idle in fixed deposit, fetching interest. I believe the company is creating a war chest."      However, some analysts believe that RIL probably believes the stock is appropriately valued now. "The only thing that comes to my mind is that RIL may try to sell its treasury stock at Rs 2,125 anticipating that there may not be an upside to it and it may be the best time to sell," said Sudip Anand, an analyst with Religare Securities.      The shares, which have the highest weightage in the benchmark index, Sensex, have surged more than 77% this year even as its chairman Mukesh Ambani fights a battle for gas with his estranged younger brother Anil Ambani. The index has gained 73% this year.      The sale may also be to avoid payment of capital gains tax, an expert said. A new tax code, that may come into force in 2011, may force the trust to pay capital gains tax. Trusts are now exempted from capital gains tax. "There is a worry that capital gains will be introduced by 2011. This will prove costly for the trust," said a Mumbai-based tax consultant, requesting anonymity.