Reliance hikes BSES offer price to Rs 255

Reliance hikes BSES offer price to Rs 255
ENS ECONOMIC BUREAU

MUMBAI, JUNE 30: Reliance Industries Ltd (RIL) on Friday raised the open offer price in its bid to take over power utility major BSES. It's now offering Rs 255 per share as against Rs 234.60 earlier. The revised price represents a premium of nearly 10 per cent to the original offer price and four per cent to the closing price of BSES shares on Friday.

RIL had announced on May 19 that it was making an open offer for the country's largest power distribution company BSES, which has a market capitalisation of roughly Rs 3,500 crore. RIL claimed that the acquisition would result in the creation of new assets in the power sector apart from the pooling of construction and management strengths.

The BSES shareprice had shot up and crossed Rs 300 on the Bombay Stock Exchange when Reliance first announced the open offer, mainly due to expectations that the offer price would be revised upwards. It was felt that Reliance would not find many takers for its offer at the price of Rs 234.60. However, the shareprice later declined as no announcement about a revision came. On Friday, it dipped Rs 10 to close at Rs 245.5 on the BSE.

If its bid is successful, RIL's stake in BSES could rise to as much as 35 per cent from the current 14.82 per cent. Financial institutions, which hold around 35 per cent in BSES, have already announced that they are not going to lower their stake in the company below 26 per cent. But sources point out that Reliance would have already factored in the possible negative response from institutions while working out the offer price.

If the takeover is successful, Reliance's power capacity will go up to 8,000 mw from the estimated 6000 mw. BSES' total capacity is around 2000 mw and it holds exclusive license for distribution of power in Mumbai and for a major part of Orissa.

RIL's plan to gain controlling stake in BSES will also help in leveraging synergies in telecom and internet ventures. BSES has recently started operations as an internet service provider and completed the laying of an optical fibre back bone in Mumbai which is in sync with RIL's stated strategy for telecom and internet sectors.

The revised offer also represents the closing price of BSES shares on the date the public announcement of the open offer was made by RIL. ``The price revision is meant to provide adequate time to the shareholders of BSES, particularly over 180,000 retail investors, to consider the revision and respond to the open offer,'' the company said. The open offer will close on July 16, 2000.

Reliance, after meeting the legal requirement of making the open offer, will be able to continue acquiring the shares through the creeping route. This will help the company emerge as the single largest shareholder of BSES, paving the way for management control, sources said.