Market speculates IPCL, RIL merger ratio
A large section in the market inclines to believe that the ratio will be 1:5, closer to current market price.
By TNN |
MUMBAI: In Wednesday’s after-market Mukesh Ambani controlled Reliance Industries announced that its board will consider merging IPCL with itself. The announcement also meant the end of years of speculation not about if the two will become one, which was a given , but the speculation was when will that happen.
Interestingly, while the announcement has ended one speculation, it has also started another, that of the likely merger ratio for the merger. For IPCL, the best merger ratio that the market is speculating is one share of RIL for every three shares of IPCL (1:3) while the worst is pegged at 1:6.
But a large section in the market are inclined to believe that the ratio will be 1:5, closer to the ratio of the current market price of the two stocks.
On Wednesday while the RIL on the BSE closed at Rs 1,289, IPCL finished at Rs 232, just a tad over its divestment price of Rs 231 per share that RIL had paid to the government nearly five years ago. Going only by the current market prices, IPCL shareholders would get 2 shares of RIL for every 11 IPCL shares they hold.
“However, it is not very often that share swap ratio in a merger is done considering only the stock price,” a dealer with a local brokerage said. “A number of other subjective as well other financial parameters are taken into consideration,” he said.
The Centre still holds a little over 10 lakh shares (0.35%) of IPCL, which was divested in May 2002 when the BJP-led NDA was in power at the centre. So postmerger , the central government will end up holding a small stake in RIL.
Interestingly, while the announcement has ended one speculation, it has also started another, that of the likely merger ratio for the merger. For IPCL, the best merger ratio that the market is speculating is one share of RIL for every three shares of IPCL (1:3) while the worst is pegged at 1:6.
But a large section in the market are inclined to believe that the ratio will be 1:5, closer to the ratio of the current market price of the two stocks.
On Wednesday while the RIL on the BSE closed at Rs 1,289, IPCL finished at Rs 232, just a tad over its divestment price of Rs 231 per share that RIL had paid to the government nearly five years ago. Going only by the current market prices, IPCL shareholders would get 2 shares of RIL for every 11 IPCL shares they hold.
“However, it is not very often that share swap ratio in a merger is done considering only the stock price,” a dealer with a local brokerage said. “A number of other subjective as well other financial parameters are taken into consideration,” he said.
The Centre still holds a little over 10 lakh shares (0.35%) of IPCL, which was divested in May 2002 when the BJP-led NDA was in power at the centre. So postmerger , the central government will end up holding a small stake in RIL.
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