RIL & RPL Merger

MERGER:

The board of directors of Reliance Industries and Reliance Petroleum on Monday approved the merger of the two firms, creating one of the world's largest petrochemical entity and offered the shareholders of RPL one RIL share for every 16 shares held by them. Shares of Reliance Industries opened down 1.24%, then dipped further to touch an intra-day low of Rs 1,213.20, a fall of 4.09% from its last closing price. Meanwhile, shares of RPL opened up 7.61% on the BSE, and touched its intra-day high of Rs 82 after the board approved the scheme of amalgamation.

THIN ARBITRAGE FOR TRADERS:

Basically, whenever a merger is announced and the swap ratio becomes public, the shares of the company that will cease to exist typically trades at a discount to the implied swap ratio. The arbitrage opportunity in the extinguishing company's share depends on liquidity.
"On Monday morning , initially both stocks will react positively in the region of 2-4% because there will always be two schools of thought in terms of which company will benefit more," said Bhakta. He expects discount (arbitrage window) will be around 2.5% to 3%. "Even if it touches 4%, it will come back to those levels converging with time, tangoing the process or sequence of merger," Bhatka said.

MERGER BY APRIL END:

The first step for RIL will be to seek legal sanction for the merger. The high court will hear the application in a week at the earliest. The court is then expected to ask RIL to get approval from shareholder. A notice for an extraordinary general meeting will have to be sent 21 days before it is held as per Companies' Act. So net-net, the merger could be consummated legally by April-end, said analysts.

EARNINGS & REFINING CYCLE:

RPL's cash flows are seen helping RIL's capital expenditure plans because RPL is more efficiently structured in terms of cash flows, analysts said. However, while the deal would bring much-needed liquidity in the short term, it also makes RIL less attractive to those who do not want to invest in a cyclical, commoditised business.
RIL already earns two-thirds of its revenues from refining, an industry that is facing a multi-year cyclical downturn. This merger would double RIL's refining capacity, thereby making its non-refining revenues negligible.
This will tie RIL's fortunes more closely to the refining cycle, which is globally entering a stage of depression. On the positive side, there will be a huge contribution to RIL's bottomline from sale of Krishna Godavari gas. The company, which pays only a 11% minimum alternate tax, can now use the depreciation from RPL plant to lower the profit of the combined entity and save on tax.

SEZ & TAX HOLIDAYS:

The merger is unlikely to have any impact on the tax holidays enjoyed by RPL, since they are bestowed upon the refining unit operating inside the special economic zone, rather than on RPL as a company. The tax benefits are expected to continue without any change. However, it will have an indirect beneficial impact due to the transfer of depreciation of RPL's plants to RIL's profit & loss accounts.

SATYAM SCAM

06th February 2009

SATYAM SCAM

This article will make you understand the Satyam Scam that happened between December 23rd 2008 to January 31st 2009 and which still continues.

Ramalinga Raju, the former Chairman of Satyam was found guilty of routing the cash funds from the company to his personal account for several years. He misrepresented the bank statements to the auditors of the company and as a result the fraud was unknown for several years. This accumulated to Rs.7200 crores which he had adjusted in several areas such as inflating cash and debtors balances and by deflating the current liabilities such as the creditors.

He planned several times to hide these malpractices but all of them failed. So as a last step he planned to acquire his Son’s Maytas Infra and Maytas Properties for which the shareholders did not approve, as most of them felt that he was doing for his personal benefits. On the same day the market value of Satyam shares came down by 80 to 100 rupees which was trading around Rs.300. So in order to increase the market price he announced the Buy-Back of shares because of which the market price again recovered. He used this golden opportunity to sell his shares and thereby reducing his stake to 2.6% from 8% and he also cancelled the buy-back of shares which for a second time reduced the market price.

Subsequently he wrote a letter to SEBI and BOD confessing the malpractices and fraud. In a letter to the board of directors, Raju states that “Satyam’s balance sheet as on Sep 30, 2008, carries an inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 reflected in the books). Further, it carries an accrued interest of Rs 376 crore which is non-existent. An understated liability of Rs 1,230 crore on account of funds arranged by me. An over stated debtor’s position of Rs 490 crore (as against Rs 2,651 crore in the books). The letter further states that the gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years”

The moment it was announced, the market value touched the bottom line of Rs 6 in NSE and Rs 11 in BSE. This Blue Chip Company was trading around Rs 800 before 1 year. This issue pulled the entire market down to the extent of 700 points (BSE) within a fraction of second.

As the second phase the government constituted the new Board of Directors and it appointed the Statutory Auditors as KPMG and Delloite and the Internal Auditor as Brahmaya & Co.,

Now the Satyam is recovering to its early life. Inspite of the fraud, it is getting several contracts. Companies such as iGate, L&T and M&M are showing interest to acquire the fraud-hit-company.

How to buy Shares??????

To buy shares, or sell some or all of your shares, you need to contact a stockbroker or share-dealing service. As well as specialist stockbrokers, most high street banks and a number of building societies offer share-dealing services. Share dealing services may be telephone, postal or internet based and commission rates can vary considerably. Before selling shares, you should ensure that you have the related share certificate(s). If you are selling shares which are registered in a nominee name, rather than your own name, you need to contact the nominee to make arrangements to sell the shares. Before entering into this field you have to gain some knowledge about various difficulties you have to face it....

News on IIM's...

It appears that the minister for human resource development Arjun Singh’s commitment to autonomy of institutions like the Indian Institutes of Management finally won the day. This will mean that the nearly 200% fee hike proposed by IIM Ahmedabad (IIM-A) will go through. Shortly after his meeting with the HRD minister, IIM-A chairman Vijaypat Singhania told reporters that there would be no rollback of the fee and that the minister’s concerns have been addressed. Mr Singh also confirmed the hike and said his concerns for the economically and socially disadvantaged students have been addressed. Concerned that students from economically and socially disadvantaged sections would find it difficult to afford studying at IIM-A, the minister had summoned IIM-A chairman Vijaypat Singhania. In a meeting that lasted well over an hour, Mr Singhania is said to have allayed the minister’s fears and explained the reasons for this hike. Earlier in the day, Mr Singh said that the fee hike was not “unwarranted” and that his chief concern was the ability of children from disadvantaged sections affording an education that costs nearly Rs 12 lakh. Mr Singhania explained that the fee hike was necessitated by the “sharp increase in faculty remuneration following the Sixth Pay Commission” and the fact that IIM-A corpus fund was facing depletion.

The IIM-A board hiked the fees for the two-year management course from Rs 4 lakh to Rs 11.5 lakh. Arguing that IIM-A was not “a temple of learning for profiteering”, Mr Singhania said that annual cost per student was Rs 5.5 lakh, or Rs 11 lakh for the two-year programme. Addressing the minister’s concern about disadvantaged students, Mr Singhania said that the institute proposes to increase the number of scholarships. “ The amount of subsidy we will offer will increase from the current level of Rs 39 lakh to Rs 8.5 crore. Besides this we have hiked the eligibility criteria”, Mr Singhania said. At present, students with a family income of Rs 2 lakh per annum can apply for scholarships. This limit has been raised to Rs 6 lakh per annum. The institute proposes six grades of exemptions. These measures, according to Mr Singhania, will increase the coverage to 62% of the students. Mr Singhania however, failed to explain how the institute would provision for the Rs 8.5 crore for scholarships, especially given the argument that the institute’s corpus was being depleted. The IIM-A chairman said SBI had confirmed that loans would be available to students and that ICICI Bank has been approached for a similar commitment. Further, IIM A will allow students to apply for scholarships as soon as they are eligible for admission. This would mean that students would not have to deposit the entire fee at the time of admission.

Instead they will be required to deposit only the net fee, the amount not covered by the scholarship. However, the cost-per-student estimate is turning out to be a curious point in the entire exercise. A consultant appointed by IIM-A in November last year put the per-student cost at Rs 3.9 lakh but four months down the line, the institute revised the estimate to Rs 5.5 lakh.

Cane - O - La

Cane-O-La

Cane-O-La is a natural and nutritious health drink, extracted from sugarcane in imported machines. It is the only Branded sugarcane drink. It is an alternative to artificial drinks. A chain of Cane-O-La outlets would be set up in South India and the first of them was coming up in Kadapa.