RELIANCE GROUP- THE DEMERGER STORY IN 2005

Reliance Industries Limited (RIL) is an Indian conglomerate holding company

headquartered in Mumbai, Maharashtra, India. Reliance owns businesses across India
engaged in energy, petrochemicals, textiles, natural resources, retail, and
telecommunications. Reliance is one of the most profitable companies in India, the largest
publicly traded company in India by market capitalization, and the largest company in
India as measured by revenue after recently surpassing the government-controlled Indian
Oil Corporation. On 05 July 2019, Reliance Industries market capitalization of Rs.
8,00,367/- crores.

The company is ranked 148th on the Fortune Global 500 list of the world's biggest
corporations as of 2018. It is ranked 8th among the Top 250 Global Energy Companies by
Platts as of 2016. Reliance continues to be India’s largest exporter, accounting for 8% of
India's total merchandise exports with a value of Rs 147,755 crore and access to markets
in 108 countries. Reliance is responsible for almost 5% of the government of India's total
revenues from customs and excise duty. It is also the highest income tax payer in the
private sector in India.

GENESIS

1960–1980

The company was co-founded by Dhirubhai Ambani and Champaklal Damani in 1960's as
Reliance Commercial Corporation. In 1965, the partnership ended and Dhirubhai continued
the polyester business of the firm. In 1966, Reliance Textiles Engineers Pvt. Ltd. was
incorporated in Maharashtra. It established a synthetic fabric mill in the same year at
Naroda in Gujarat. On 08 May 1973, it became Reliance Industries Limited. In 1975, the
company expanded its business into textiles, with "Vimal" becoming its major brand in
later years. The company held its Initial public offering (IPO) in 1977. The issue was over-
subscribed by seven times. In 1980, the company expanded its polyester yarn business
by setting up a Polyester Filament Yarn Plant in Patalganga, Raigad, Maharashtra with
financial and technical collaboration with E. I. du Pont de Nemours & Co., U.S.

1981–2000

The Hazira petrochemical plant was commissioned in 1991–92.

In 1995/96, the company entered the telecom industry through a joint venture with
NYNEX, USA and promoted Reliance Telecom Private Limited in India.

2001-2005

In 2001, Reliance Industries Ltd. and Reliance Petroleum Ltd. became India's two largest
companies in terms of all major financial parameters. In 2001–02, Reliance Petroleum was
merged with Reliance Industries.

In 2002–03, RIL purchased a majority stake in Indian Petrochemicals Corporation Ltd.

(IPCL), India's second largest petrochemicals company, from the government of India.
IPCL was later merged with RIL in 2008.

SAGA of 2005, THE DISPUTE

Dhirubhai Ambani died in 2002, but he hadn't left a will. Mukesh became chairman and
managing director of Reliance Industries Ltd Anil was made vice-chairman.
Mukesh & Anil were in a bitter feud for the control of the Ambani empire & it became ugly
when Mukesh tried to oust Anil from the Reliance board.

The annual report of Reliance had Dhirubhai & Mukesh, not Anil, on the front page.

It is at this time that the differences between the brothers became public.

In November 2004 in an interview with CNBC TV18 Mukesh Ambani admitted that the
brothers disagreed on the running of the Ambani Group. He said:

'Well, there are issues which are ownership issues. These are in the private domain, but
as far as Reliance is concerned it is a very-very strong professional company.'

At the time the Ambanis had a 46.67% stake in Reliance Industries Ltd, the public 13.48%,
and foreign institutional investors 22.85%.

June 2005: Their mother, Kokilaben, intervenes and splits Reliance Group into 2.

December 2005: The split is approved as Mukesh gets Reliance Industries & IPCL, and
Anil gets Reliance Infocomm, Reliance Energy, and Reliance Capital

NEW STRUCTURE AFTER RESTRUCTURING

The new RIL structure gave Mukesh Ambani absolute independent control in the business
of oil exploration, refining, petrochemicals, and textile businesses through a standalone
entity in Reliance Industries Ltd. (RIL) along with Indian Petrochemicals
Corporation Limited (IPCL). His shares also included biotech firm Reliance Life
Sciences and Trevira, a company in Europe which manufactures polyester fibers.

Anil Ambani got control over power, communication, and financial businesses through
four companies which came under Anil Dhirubhai Ambani Enterprise (ADAE) as part
of the Reliance group. These four companies were named as Reliance Capital Ventures
Ltd. (pro-posed to be merged with another listed company Reliance Capital Ltd.),
Reliance Energy Ventures Ltd. (proposed to be merged with existing company Reliance
Energy Ltd.), Reliance Communication Ventures Ltd. (these include both Reliance
Info-comm and Reliance Telecom) and Reliance Natural Resources Ltd. (which includes
businesses in gas-based energy undertakings).

The entity headed by Mukesh Ambani is referred to as the Reliance Industries Limited
whereas Anil's Group has been renamed Reliance Anil Dhirubhai Ambani Group
(Reliance ADA Group).

Some shareholders opposed the decision saying it was more a family arrangement than a
business separation.

Prior to the demerger, RIL’s share was traded around 978 per share, but after the
demerger the combined share values of five companies came to around 1,235, which was
a gain of almost 26 percent for every shareholder.

17th January 2006

A unique investment and trading era end on 17th January 2006, at the Indian stock
markets. Reliance Industries, India's largest private sector company, having the widest
investor base in the country (over 3.1 million) and group revenues equivalent to about 2.6
per cent of India's GDP, trades for the last day today as a consolidated company.
As per the demerger approved by the RIL board in August last year, the Ambani brothers
-- Mukesh and Anil -- will head different businesses and five listed companies will emerge
as potential investment opportunities by March FY 2006.

Of these, Reliance Industries, Reliance Capital and Reliance Energy are already listed at
the exchanges and they will now get re-valued by analysts in a new demerged business
scenario. Two other companies will be listed by March-end.

Special Trading Session by National Stock Exchange and Bombay Stock Exchange
on 18th January 2006

The Bombay Stock Exchange and the National Stock Exchange hold a special one-hour
trading session on Wednesday, January 18, from 8.00-9.00 a.m. to facilitate price
discovery of the post-demerger price for Reliance Industries Ltd.

Only Reliance Industries will be traded in this session, without circuit filters, while the
unlisted companies will be listed in coming months.

While the special trading session is on, it will not affect the overall market or Sensex /
Nifty.

The closing price for Reliance Industries after the special trading session will be used to
determine the opening level of indices (and a new RIL weightage in the indices) at 10.00
a.m. on Wednesday.

What does the RIL shareholder get?

All shareholders of RIL will get shares of the four new firms in a ratio of 1:1. This means
RIL shareholders will get one share each of Reliance Communications Ventures (face value
Rs 5), Reliance Energy Ventures (Rs 10), Global Fuel Management Services (Rs 5) and
Reliance Capital Ventures (Rs 10) for each share held. All the four companies will be listed
on the stock exchanges.

Today’s Reliance Industry Ltd and Reliance Anil Dhribhai Ambani Group’s
Structure:

Reliance Industries Ltd. (RIL), an Indian conglomerate of companies headed by

Mukesh Ambani:
• Reliance Industries Ltd : Oil and Gas-related Operations
new aerospace division which will design, develop, manufacture, equipment and
components, including aircraft, engine, radars, avionics and accessories for military and
civilian aircraft, helicopters, unmanned airborne vehicles and aerostats.
Major subsidiaries and associates
On 31 March 2013, the company had 123 subsidiary companies and 10 associate
companies.
• Reliance Retail: Reliance Fresh, Reliance Footprint, Reliance Time Out, Reliance
Digital, Reliance Wellness, Reliance Trends, Reliance Autozone, Reliance Super,
Reliance Mart, Reliance iStore, Reliance Home Kitchens, Reliance Market (Cash n
Carry) and Reliance Jewel.
 • Reliance Life Sciences: Medical, Industrial Biotechnology Opportunities, bio-
pharmaceuticals, pharmaceuticals, clinical research services, regenerative
medicine, molecular medicine, novel therapeutics, biofuels, plant biotechnology,
and industrial biotechnology sectors of the medical business industry.
• Reliance Institute of Life Sciences (RILS): offering higher education in various
fields of life sciences and related technologies.
• Reliance Logistics: selling transportation, distribution, warehousing, logistics, and supply
chain-related products, supported by in-house telematics and telemetry solutions. It
provides logistics services to Reliance group companies and outsiders.
• Reliance Clinical Research Services (RCRS): a contract research organisation (CRO).
Its clients are primarily pharmaceutical, biotechnology and medical device companies.
• Reliance Solar, the solar energy subsidiary of Reliance, was established to produce and
retail solar energy systems primarily to remote and rural areas. It offers a range of products
based on solar energy: solar lanterns, home lighting systems, street lighting
systems, water purification systems, refrigeration systems and solar air conditioners.
• Relicord : is a cord blood banking service.
• Reliance Jio Infocomm Limited (RJIL): previously known as Infotel Broadband, is a
broadband service provider which gained 4G licences for operating across India.
• Reliance Industrial Infrastructure Limited (RIIL): build and operate cross-country
pipelines for transporting petroleum products. RIIL is mainly engaged in the business of
setting up and operating industrial infrastructure.
• LYF: a 4G-enabled VoLTE device brand from Reliance Retail.
• Network 18: a mass media company. It has interests in television, digital platforms,
publication, mobile apps, and films. It also operates two joint ventures, namely Viacom
18 and History TV18 with Viacomand A+E Networks respectively. It also has
acquired ETV Network and since renamed its channels under the Colors TV brand.
• Reliance Eros Productions LLP: joint venture with Eros International to produce film
content in India.

Reliance Anil Dhirubhai Ambani Group (ADAG), a group of Indian companies headed
by Anil Ambani, including:
 Reliance Communications: data solutions for Homes and Small Enterprises cater
to buildings connected to the Reliance network. also owns the world’s largest
private under-sea cable system under its subsidiary Global Cloud Xchange, which
offers a comprehensive portfolio of solutions customized for Carriers, Enterprises
and New Media Companies globally.
  Reliance Capital is one of India's leading private sector financial services
companies and ranks among the top 4 private sector financial services and banking
groups, in terms of net worth.
Reliance Capital has interests in asset management and mutual funds; life and
general insurance; commercial finance; equities and commodities broking;
investment banking; wealth management services; distribution of financial products;
exchanges; private equity; asset reconstruction; proprietary investments and other
activities in financial services.
 Reliance Infrastructure Ltd (RInfra):

Power business i.e. generation, transmission and distribution of electricity.

Distribution it serves 2 out of 3 homes in India’s two premier cities, Mumbai and Delhi.

Generation generates over 941 MW of electricity through its power stations located in
Maharashtra, Andhra Pradesh, Kerala, Karnataka and Goa.

Transmission RInfra is the amongst the largest private player in the transmission sector
developing 3 transmission projects.

EPC RInfra is amongst the leading Engineering, Procurement and Construction (EPC) players in
India with developing 11 projects. comprising of 6 power projects of 9,900 MW, 1 transmission
project and 4 road projects. EPC division is looking to expand its footprint beyond the power sector
by developing competencies in metro rails etc.

Infrastructure It focuses on developing urban infrastructure projects such as roads and metro rail.

Roads All road projects are urban centric connecting major industrial and tourist centres like
Bangalore Chennai. Delhi Agra, Jaipur Bikaner, Pune Satara, Kandla Mundra etc.

Mumbai Metro developed and operating metro rail (Mumbai Metro) in the country.

Airports RInfra is currently operating five regional brown-field airports in Maharashtra i.e
Yavatmal, Nanded, Latur, Osmanabad and Baramati for a lease period of 95 years.

Defence RInfra forayed into defence through acquisition of Pipavav Defence & Offshore
Engineering Co. Ltd which is the largest ever acquisition in defence sector in India. Pipavav has
the leadership in defence sector capable of building submarines, aircraft carriers & warships, LNG
carriers, offshore platforms and Rigs alongwith technological tie-ups with global defence leaders.

 Reliance Entertainment:
Reliance Entertainment is the flagship motion picture arm of India's Reliance Group with a
significant presence in filmed entertainment (film production and distribution). Reliance Group also
has key interests in broadcasting and new media ventures.