MUMBAI, Mar 19: Reliance Petroleum Ltd has convened an extraordinary general meeting (EGM) on April 15 to seek shareholders' approval to hike its authorised share capital by Rs 2,000 crore to Rs 7,000 crore. This is being done to pave the way for the phased allotment of three equity shares in lieu of a triple option convertible debenture (TOCD) in the form of a fourth conversion option for investors.The move, apart from giving an option to about 24 lakh TOCD holders to opt for equity in the company, is also aimed at shoring up the balance sheet of the company by reducing the debt-to-equity ratio. If all the TOCD holders decide to surrender their debentures in return for three equity shares, it would lead to a lowering of the debt-to-equity ratio to 0.45:1 from the current level of 0.80:1.
This, according to sources, would enhance the capital base of the company and enable it to participate in the attractive opportunities emerging in the oil sector, pursuant to reforms and deregulation of the refining,marketing and distribution and energy sectors. The fourth conversion option which is being offered to TOCD holders is to allot equity-linked securities which shall automatically be converted into three equity shares of the face value of Rs 10 each.
Under this option, the first equity share at par would be allotted in November 1999, followed by two equity shares at a premium of Rs 5 each in November 2000 and November 2001. The TOCDs, when converted into equity shares, would ultimately result in an increase in the issued and subscribed equity share capital of the company by an amount not exceeding Rs 1,375 crore.
The record date for the purpose has been fixed as April 25, and the period during which the conversion offer would be in force will be some time in May-June this year.
Soon after the extraordinary general meeting, the company has convened a meeting of TOCD holders to get their approval to the fourth option. The company will seek shareholders' nod to allow the board to issue equity-linkedsecurities to meet the redemption value of those TOCDs which are not converted into equity shares at a price equivalent to the redemption value which would eventually lead to an allotment of three equity shares of the value of Rs 10 each.
The equity-linked securities would be listed on all the exchanges where the securities of the company are listed. The need to come out with the fourth option has been prompted by the fact that currently, a TOCD and two warrants can be sold for Rs 48 in the market as against Rs 40 worth of shares received if the same were to be surrendered. This would mean that no investor would like to surrender the TOCDs.
On the other hand, if a TOCD holder who has already sold his warrants wishes to convert his TOCD to an equity share, he has no option available. "Most of the TOCD unitholders, however, have 100 TOCDs allotted to them which shows that they are retail investors who would have invested in these instruments with an eye on holding equity shares of the company at some pointof time. The fourth option is meant for these investors," said a source.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
