RIL - RPL Merger

Reliance Petroleum RPL, which went public a few years back, is to be merged with Reliance Industries. The RIL board meeting to be held on March 2 to decide further move. The swap ratio is to be in favour of RIL shareholders.The ratio is likely to be 1 share of RIL for 18 shares of RPL. The Merged entity will become India’s biggest company in terms of net profit surpassing Oil and Natural Gas Corporation (ONGC). In terms of networth, and sales, it will continue to remain second after Indian Oil Corporation.

Where RIL stands to benefit clearly is in savings on income tax and dividend distribution tax. The current tax holiday for RIL’s Jamnagar unit is set to expire by March 31, 2009, while RPL’s refinery, which has SEZ status, has a tax holiday for another seven years. RPL can also escape paying dividend distribution tax in a merger. Otherwise, it would have to pay tax every year when it is returning money to shareholders.

Keep watching this space for more details.