Reliance Energy to beef up capital by Rs 8000 Crores

Reliance Energy Ltd has announced that the Board of Directors of the Company at its meeting held on December 02, 2007 has approved the proposal for new equity capital infusion of up to Rs 8,000 crore into the Company.

The Reliance Energy group is engaged in several mega projects under implementation and under consideration, in power generation, transmission, and distribution, as well as infrastructure development in areas such as highways, bridges, metro rail, real estate, etc.

A large number of new mega infrastructure projects are also soon being put to bid, to provide further impetus to the country's rapidly accelerating economic growth.

The new equity capital will substantially enhance Reliance Energy's net worth, and further augment its borrowing capabilities, to enable greater participation in these mega growth opportunities in high growth areas, thereby generating superior returns for over 1.5 million shareholders.

The new equity capital infusion is proposed through a preferential offer of equity shares and / or equity related securities to Reliance Anil Dhirubhai Ambani Group. Life Insurance Corporation, New India Assurance, Oriental Insurance, General Insurance, National Insurance and United India Insurance, which have been long-term shareholders of the Company over the past several decades and who collectively hold approx. 18% of equity, will be provided an opportunity to participate in the proposed offering, on the same terms and conditions.

The preferential offer, which is subject to necessary approvals from shareholders, will be made at a price of Rs 1,812 per share, representing a record premium of 5% to the current market price, and the minimum price as per applicable SEBI Guidelines.

Commenting on the development, Shri. Anil Dhirubhai Ambani, Chairman, of the Company, said: "We have a great sense of excitement at the unprecedented opportunities unfolding before the Reliance Energy group, in the high growth areas of power and infrastructure development.

The new equity infusion of capital of up to Rs 8,000 crore will propel Reliance Energy into a completely new orbit, facilitating our participation in a large number of forthcoming mega projects, for the benefit of our over 1.5 million shareholders.

We believe our committed infusion of new equity capital at a premium of 5% to the current market price, and the minimum SEBI formula determined price:

sets a new trend in corporate governance and transparency, by adoption of world class practices and also provides a very strong signal to the capital markets, and the International and domestic investor community, on our confidence in the Company's future growth prospects.

Benefits of the Proposed Offer for Reliance Energy's ShareholdersThe proposed infusion of new equity capital will lead to the following benefits for Reliance Energy:

- Reliance Energy will rank among the 20 most valuable private sector Companies in India in terms of all major financial parameters, including assets, sales, net worth, profits and market capitalization, reflecting the Company's inherent financial strength

- Substantial increase in the net worth from Rs 10,542 crore to Rs 20,000 crore by March 2009, an increase of nearly 100%

- Further strength to our existing AAA credit rating profile

- An increase in our borrowing ability from Rs 10,000 crore to Rs 20,000 crore, even at a conservative debt: equity level of 1:1

- An increase in the Book Value per share, from Rs 447 per share to Rs 720 per share.

Source : Equity Bulls

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