Mumbai: Reliance Industries Ltd (RIL) is planning to create four new units for its various businesses, two people in the know said.
The subsidiaries could be in refining and marketing; exploration and production (E&P); petrochemicals; textiles; hydrocarbons and real estate.
“The new subsidiaries would have an authorized share-capital of Rs1,000 crore each,” one of the two people said, requesting anonymity.
The company plans to apply to the corporate affairs ministry shortly to obtain requisite approvals required for incorporating the companies.
For the six segments RIL operates in—refining and marketing; petrochemicals; oil and gas exploration; retail; telecom/digital services and media and entertainment—the firm has 99 subsidiaries, joint ventures and associate firms, according to its 2016-17 annual report.
“The company is engaged in multiple businesses which inter alia include E&P, refining, petchem, retail, telecom and media. Reliance has a wide corporate holding structure (having multiple subsidiaries/associates) due to reasons like regulatory requirements, joint ventures, strategic investments and past acquisitions,” a RIL spokesperson said in an emailed response. “The company continuously endeavors to have efficient holding structure, so that it can maximize shareholder value on sustainable basis.”
“RIL has been, for any new business segment or a sub-segment, creating a new entity. This could be done for two reasons: one, need to segregate risks and funding and save taxes and two, ease of raising funds or resources for specific projects by backing from the parent company,” said a Mumbai-based analyst with a domestic brokerage.
Last March, RIL restructured the shareholding of its promoter entities where 1.2 billion shares held by 15 entities were transferred to eight others. The entities involved were limited liability firms wherein disclosure is limited as one does not have to make all financial declarations with the registrar of companies.
“RIL creates new subsidiaries and then amalgamates them after few years. While in some cases, it must be doing this to list some of these entities at a later date, in a few it is done to enable better cash management and operational efficiency,” said another analyst tracking RIL.
Among the new subsidiaries to be created, RIL may be forming a new one to bring under one umbrella, all of its real estate ventures. RIL had this February, bought a 65% stake in a real estate project in Bandra-Kurla Complex in central Mumbai for Rs1,105 crore, taking its total investment in property to $2.6 billion. RIL has also approved an increased investment limit for in Reliance Corporate IT Park Ltd, a wholly owned subsidiary from Rs3,800 crore to Rs6,000 crore for the next financial year.
According to RIL, it has a policy for determining a material subsidiary for the company when its income or net-worth exceeds 20% of the consolidated income or net-worth respectively, of the company.