Mumbai: Mukesh Ambaniled Reliance Industries (RIL) on Thursday sold its own shares held under Petroleum Trust and raised Rs 3,188 crore. The company plans to use the proceeds to acquire oil blocks abroad, taking advantage of the dip in their valuations. The trust, a part of RIL, sold nearly 1% stake or 1.5 crore RIL shares at an average Rs 2,125 a piece. The trust was created in 2002 following the merger of Reliance Petroleum, the company that set up the first oil refinery in Jamnagar, Gujarat with RIL. Considering Reliance Petroleum was an RIL subsidiary and according to Companies Act, it cannot hold shares of its parent. This left RIL with two options—either extinguish the shares resulting out of a share-swap merger or park the stock in a trust. RIL chose the latter. Interestingly, the second time RIL decided to merge Reliance Petroleum, the outfit that built another refinery in Jamnagar, with itself in 2009, it chose to cancel the shares resulting out of this amalgamation. The Petroleum Trust now owns nine crore RIL shares compared to 10.47 crore or 6.65% stake before the sale. The transaction, is the largest secondary sale of shares since the DLF stake sale in May. The promoters of the realty firm sold 9.9% then, raising Rs 3,860 crore. The RIL scrip closed at Rs 2,086 on BSE on Thursday. The trust structure or treasury stock provides the flexibility to sell the shares at an appropriate time without the expansion of capital and has voting rights. Several enterprises, from banks to hospitality to liquor to automobiles, had undertaken a similar route. Suresh Surana of accounting firm RSM Astute Consulting group said, “The major advantage to hold shares in this fashion (trust format) is the flexibility factor of selling the shares when required rather than going for a fresh issue of shares to which a company has to comply with the preferential allotment guidelines besides the lock-in-period it has.’’ Surana adds that Indian rules don’t favour a listed company buying its own shares from the market and hold them as treasury stocks compared to the US where a company can do that. Recently, Vijay Mallya’s United Spirits raised Rs 1,000 crore through the sale of 10.28 million treasury shares in the market. One of the first organisations to adopt the trust structure was ICICI Bank (merger of ICICI with ICICI Bank) some seven years ago. In 2008, Mahindra & Mahindra formed the M&M Benefit Trust consequent to the merger of some of its subsidiaries with the tractor major. The M&M trust is the single largest promoter shareholder with a 9.3% stake in the Mumbai-based automobile firm.
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