The cost per share of Reliance Petroleum Ltd (RPL) in case the investors surrender the non-convertible portion towards the payment of warrants will work out to at least Rs 34-35 instead of Rs 20. The cost of Rs 34-35 includes the interest cost the investor would have earned on the non-convertible portion of the TOCD. The Rs 40 invested in 1993 would have at least become Rs 68 now.

The fourth option gives the investors an option to convert their non-convertible portion of the Triple Optionally Convertible Debentures into threeequity shares at a price of Rs 10, Rs 15 and Rs 15 to be issued in 1999, 2000 and 2001 respectively. The cost per share will work out to around Rs 13.3 per share. But if one adds to it the interest cost which the investor loses, the actual cost of an equity share would work out to anywhere between Rs 22-23, assuming an interest cost of 12 per cent per annum.

Investors parked their funds in the TOCD in August, 1993 (allotted sometime in November/December in the same year). The non-convertible portion of TOCD would have earned interest in the past four and a half years, which the company is not taking into account. An investment of Rs 40 in 1993-end (based on a coupon rate of 12 per annum compounded) would have at least become Rs 68. So the investors are being deprived of an interest credit of at least Rs 28 on one TOCD of Rs 40.

So it is in the best interest of the investors to retain the non-convertible portion of TOCD and go in for warrant conversion by paying Rs 20 and applying for one equity share perwarrant. The non-convertible portion of Rs 40 would be redeemed in three installments of Rs 20, Rs 30 and Rs 30 in the 6th, 7th and 8th year ie, 1999, 2000 and 2001 from the date of issue.

At the same time, irrespective of the current market price of Rs 21, the offer to apply for equity shares against the warrants is an attractive offer, provided the holder chooses the right option.

RPL had issued 36.20 crore TOCDs of the face value of Rs 60 each in 1993. A sum of Rs 20 per cent TOCD was first converted into two equity shares of Rs 10 each and the balance of Rs 40 per TOCD is now outstanding in the form of debt with two warrants entitling the holder two equity shares at Rs 20 each.

This debt portion of Rs 40 per TOCD either may be surrendered against exercise of warrants entitling the warrant holders to two equity shares.

Else, the holder can straightaway pay Rs 20 per share to get one share against each warrant. Those who do not opt for this option are entitled to redemption of Rs 80 per TOCD inthree annual installments in November 1999 to 2001.

The holders who do not surrender their TOCDs against the warrants were offered the fourth option to convert each TOCD into three equity shares. In the event of TOCD holders opting for the option of acquiring additional shares, the company may issue shares to the extent of unconverted TOCDs, on the same terms to the promoter, Reliance Industries Ltd (RIL), which will up RIL's stake from the 39 per cent level on the fully diluted equity on the exercise of equity options. Reliance has already informed Reliance Petroleum of its willingness to increase its holding up to 50 per cent of the fully diluted share capital.

The investors will be increasing their stake in Reliance Petroleum's world class 18 million tonne per annum (TPA) grassroot refinery at Jamnagar, Gujarat. The refinery is expected to be completed in the second/third quarter of 1999.