It seems strange, talking about two brother companies that decided to turn a deaf ear to each other, and took the whole world by surprise when they split immediately after their legendary father Dhirubhai Ambani’s demise. If not for anything else, they were united towards their mother, but even she could not trigger that air of familiarity between the two estranged brothers.
Of what is predicted as an intelligent strategic move, RIL and RPL are planning to merge together. No wonder they become the big oil bully in case the merger works out. What is strategic about this move is the fact that this could be the start of many more such mergers to come, in other avenues that interests the Ambani brothers in terms of surplus profits.
They easily pulled off this move of becoming, perhaps, the world’s biggest producer of petrochemicals and petroleum products, ensuing, that this is a beneficial move considering the present shape the global oil market is in.
It is being said that this combination if, it materializes can easily create a dinosaur brand, which has the potential of producing almost 20pc of the combined turnover of the 30 listed companies in the BSE index.
Latest analyst’s reports foretell that this new merged entity can give PSU giant ONGC almost a run for their money in terms of net profit. But when it comes to net worth and net sales, reliance bags the second place to Indian Oil Corporation.
On what grounds does this merger actually benefit the brothers? Well, there are too many to quote, but to name a few, they will save up lot of tax levied under various parameters on dividend distribution and also in income tax. This will also facilitate the creation of a holistic balance sheet, which can assist RIL in generating a working capital and can even save resources for future expansion plans.
This merger can really open doors for a global congregation of sorts , in the field of petroleum , refining and marketing, with this easily being the sixth largest private sector refinery with an astounding capacity of about 1.2 million barrels a day.
Traditionally RIL has always managed to keep itself abreast with whichever company that has earned itself a good name in people’s books , and they have never failed to acquire such companies and cash out on their good reputation in the market. This previously happened, with Jamnagar refinery, now christened as Reliance Petroleum, and now when RPL is going great guns; it hardly makes any sense to keep them isolated.
All said and done, the moot point yet remains as to what are the shareholder’s benefits, and this will be learnt only when the merger comes out in public and the swap ratio is studied in finer details.
