Reliance Communications completes corporate reorganisation in record 6 months

Reliance Communications Ltd (RCOM) has announced the completion of its corporate reorganisation plan initiated in March 2006, in a record period of less than 6 months from the listing of the Company. The orders of the Hon´ble High Court of Bombay approving the reorganisation has been filed with the Registrar of Companies, and the stock exchanges.

The Company has now become the primary operating Company for the entire telecom business. The Company and its wholly-owned subsidiaries own 100% of the networks, facilities, licenses and properties used in its business.

These include inter alia the nationwide CDMA and GSM wireless networks, the national and intra-city fibre optic networks, the FLAG and FALCON global submarine cable systems, the Reliance World retail chain, the internet data centres, contact centres, network operating centres, and other facilities used in these businesses.

The entire shareholdings of the Promoter Group in certain affiliates will stand exchanged for equity shares of the Company, thereby providing a simple and transparent ownership structure, and completely aligning the interests of the Promoter Group with over 2 million shareholders of the Company.

The market capitalisation of the Company increases to Rs 62300 crore (US$ 13.4 billion) - among the top 10 Companies in India.

The Company is part of the benchmark Sensex, Nifty and MSCI indices, widely tracked by domestic and international investors.

Background to the corporate reorganisation

Under the ownership structure resulting from the de-merger of Reliance Industries Ltd (RIL), the Company did not own a majority stake in any of its principal operating Companies or other affiliates.

Following the de-merger, the ownership by the Company of its principal operating Companies was as follows:

- 45.34% of Reliance Infocomm Ltd (RIC), which in turn held 100.00% of FLAG Telecom Ltd (FLAG);

- 45.00% of Reliance Communications Infrastructure Ltd (RCIL); and,

- 35.60% of Reliance Telecom Ltd (RTL).

The balance of the equity shareholdings in RIC, RCIL, and RTL were owned entirely by the Promoters of the Company. This legacy structure had significant drawbacks with regard to resource mobilization, transparency, and valuations.

Terms of the corporate reorganisation

In order to address the situation, on March 12, 2006, the Board of the Company approved a reorganisation pursuant to which (a) RIC has been merged fully with the Company and its activities are now operating divisions of the Company, and (b) RCIL and RTL, and FLAG have become wholly owned subsidiaries of the Company. In addition, the Company has acquired the 134 acre Dhirubhai Ambani Knowledge City (DAKC) complex and several other properties used in its business which were previously privately owned.

The corporate reorganisation was effected by way of an exchange of shares under a Scheme of Amalgamation, and did not involve any cash outgo.

Issued share capital of the Company

Under the terms of the corporate reorganisation, new equity shares of the Company are being issued in exchange for the Promoters´ direct equity shareholdings in RIC, RCIL, and RTL and as consideration for the properties. The issued equity share capital of the Company will stand at 204.461 crore shares of Rs 5 each.

The market capitalisation of the Company considering its increased equity share capital, increases to Rs 62,300 crore (US$ 13.4 billion). Accordingly, the Company ranks among the top 10 Companies in India.

Shareholding pattern of the Company

Post the corporate reorganisation, the shareholding pattern of the Company is as follows:

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	Category						Shareholding
Domestic institutions / Banks / Mutual funds			06.30%
Foreign investors - FIIs, NRIs, GDRs, and others			14.15%
Indian public						12.93%
Reliance Anil Dhirubhai Ambani Group				66.62%
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Total							100.0%
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Corporate milestones since the listing of the Company

In keeping with its commitment to maintain the highest standards of governance and to maximise shareholder value, the Company has moved forward rapidly since its listing to optimize its corporate and financial structure. Notable milestones include the following:

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Event							Date
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De-merger effective					December 21, 2005
Reliance ADA Group receives control of RCOM		February 07, 2006
Listing on the BSE / NSE				March 06, 2006
Announcement of corporate reorganisation			March 12, 2006
US$ 500 million zero coupon FCCB			March 22, 2006
Name change to Reliance Communications Ltd			June 07, 2006
GDR listing on LuxX for RIL GDR holders at de-merger		August 03, 2006
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Source : Equity Bulls

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