CAIRN INDIA: STRIDING AHEAD !!!

 

Scrip Code: 532792 / CAIRN

CMP:  Rs. 339.15; Buy at current levels.
Short term Target: Rs. 370, 6 month Target – Rs. 415; STOP LOSS – Rs. 312.00; Market Cap: Rs. 64,539.18 cr; 52 Week High/Low: Rs. 401.10 / Rs. 249.30

Total Shares: 190,29,68,633 shares; Promoters : 112,27,13,999 shares –59.00 %; Total Public holding : 78,02,54,634 shares – 41.00 %; Book Value: Rs. 167.12; Face Value: Rs. 10.00; EPS: Rs. 0.11; Div: 30.00 % ; P/E: 00.00 times; Ind. P/E: 11.77; EV/EBITDA: 00.00.

Total Debt: 1,350.00 Cr; Enterprise Value: Rs. 67,730.45 Cr.

CAIRN INDIA LTD: CAIRN INDIA LTD was incorporated in 2006 and is based in Gurgaon, India. The company was former subsidiary of Cairn UK Holdings Limited. Cairn India is an exploration and production company, a leading player in the oil and gas industry in India. Cairn India has been focusing on south Asia, especially India where it has interests in 15 blocks. The firm made more than 30 oil and gas discoveries in India and was listed in January 2007 through an IPO after it spun off from its parent Cairn Energy Plc. Vedanta Resources Plc along with its subsidiary SESAGOA acquired the controlling stake of 51 % at $8.6 billion in Cairn India at Rs.405/sh. SESAGOA brought in $3 billion for 20 % and the rest 31 % was by Vedanta. Cairn holds interest in 9 oil and gas block/fields located in the Baremer basin, the Mumbai offshore basin, the Kerala – Konkan basin, the Palar-Pennar basin, and the Cambay basin in India, as well as 1 block in the Mannar basin off the coast of northwestern Sri Lanka.The company also operates a pipeline and storage terminal. Cairn has working interest in 14 Exploration & Production blocks in Ravva and Cambay blocks which produces 51.4k boepd (Cairn WI 14k bpd). Cairn India sells its oil to refineries; and gas to public sector undertakings and private buyers. Cairn has commissioned three trains at MPT and pipeline section from MPT to Salaya, through which it is delivering crude to refiners. Government of India had granted Cairn India some oil & gas fields through Production Sharing Contract. The company had interest in oil & gas blocks/fields which include PR-OSN-2004/1, KG-ONN-2003/1, KG-OSNsn-2009/3 & MB-DWN-2009/1. CAIRN INDIA is compared with Oil India ltd and ONGC locally and with Japan Petroleum Exploration Company Ltd internationally. 

Investment Rationale:

In Jan'12, Cairn has commenced production from the Bhagyam oilfield in Rajasthan on approval granted by GOI. The benefit of the same will be reflected in Q4FY12. Further, Cairn expects to ramp-up the crude oil production from Bhagyam field to approved plateau rate of 40 Kbopd. According to the Company's management Mangala field, the biggest of the 18 discoveries in Rajasthan block, can produce 150 kbopd as against 125 Kbopd. Bhagyam, the second biggest field in the Rajasthan block, can produce 60 Kbopd as opposed to current approved peak output of 40 Kbopd (50 %), while Aishwariya oilfield can contribute 25 Kbopd as compared to earlier 10 Kbopd (150 %) and other fields can produce 65 Kbopd, subject to required approvals. As on 31st Dec'11, gross cumulative Rajasthan development capital expenditure was at US$ 3,323 Mn. Management has stated that further investments are planned to augment processing capacity and pipeline infrastructure. Recently, Mr. Jaipal Reddy (India's oil minister) has suggested that he will take actions to boost investment and raise oil & gas production. It is believed that this will speed up the process of approvals for production ramp up from Rajasthan fields, this should be significantly positive for Cairn India. Also, India has cut down its crude oil sourcing from Iran. This also demands for higher domestic oil production along with other diversified sources. Cairn's higher crude oil production at elevated international crude oil price along with weakening rupee will partly mitigate the negative impact of increased oil cess announced in the 2012-13 budgets. Cairn India has approached the petroleum minister, seeking support in making a case for a rollback of cess hike to the finance ministry, as per media reports. Any immediate rollback of cess looks unlikely. Also, the recent correction in the stock price discounts most of the negatives. In FY13, it is expected that refineries like RIL, Essar Oil and IOC will increase their crude oil off take from Cairn India (Rajasthan oil fields). With the commissioning of Essar Oil's expanded capacity the demand of Cairn's crude oil will increase. Further, Cairn has been pursuing with the Directorate- General of Foreign Trade (DGFT) for permission to sell crude oil to RIL's second 29-mt refinery at Jamnagar, which is a SEZ refinery. Cairn India’s dividend policy announcement will be a key trigger & will abate concerns regarding the utilization of cash. The Company's management has indicated to announce a sound dividend policy, they may announce special dividend in the coming result declaration. It is also believed that there is a possibility of upward revision in the company's Rajasthan crude oil reserves potential which the market has not discounted yet. Further, any significant reserves declaration from Sri Lankan block can add major value to the Company. Currently, the block is in E&D phase so the same is yet not been priced in. However, experts are bullish on the growth prospects of Sri Lankan block.

Outlook and Valuation:

The recent correction in stock price of Cairn India is mainly due to hike in cess rate by GOI and this will impact earnings. However, Cairn's higher crude oil production from Rajasthan block at elevated international crude oil price along with weakening rupee will partly mitigate the negative impact of increased oil cess. The Company has approached the petroleum minister, seeking support in making a case for a rollback of cess hike & any immediate rollback of cess looks unlikely. In the Union Budget 2012-13, GOI increased the cess on crude oil production to Rs. 4,500/mt from Rs. 2,500/mt earlier. The earlier revision in cess happened during the Budget 2006-07. This increase in cess is attributed to indexation by the government. Although, cess is cost recoverable while calculating the profit petroleum for the upstream companies, the absolute impact in earnings would be still substantial. CAIRN INDIA has announced its production figures for the JAN - MAR quarter, the average daily gross operated production was of 1,80,293 Barrels of Oil Equivalent (BOE) for the quater, with working interest production at 1,07,292 Barrels of Oil Equivalent Per Day (BOEPD). Cairn India announced an oil discovery in the Nagyalanka - SE-1 well, which is is the second discovery in the onshore KG-ONN-2003/1 block in the Krishna - Godavari basin. Testing is underway and the discovery will be appraised further for establishing commerciality. At the current market price of Rs. 339.15, the stock is fairly valued at 5.3 x EV/EBIDTA and trading at a PE of 6.00 x FY13E. The company can post Earnings per share (EPS) of Rs. 44.40 in FY12E and Rs. 56.70 in FY13E. One can buy CAIRN INDIA Ltd with a target price of Rs. 370.00 for Medium to Long term investment. CAIRN INDIA to declare its results on April 20th 2012.

SOTP valuation (FY2013E)

BUSINESS SUBSIDIARY (FY13E)	Value per Share (Rs.)
MBA (DCF)	286.00
Ravva and Cambay basin (EV/BOE 11x)	9.00
Barmer Hills (EV/BOE 8x - 50% disc. to MBA)	11.00
Other exploratory (EV/BOE 4x-75% disc. to MBA)	36.00
TOTAL EV	342.00
NET DEBT	(25.00)
EQUITY VALUE (Rs.)	367.00

KEY FINANCIALS	FY11	FY12E	FY13E	FY14E
SALES (Rs. Crs)	10,277.90	13,013.50	16,429.90	16,399.90
NET PROFIT (Rs. Crs)	6,334.40	8,693.50	11,095.20	9,415.70
EPS (Rs.)	32.40	44.40	56.70	48.10
PE (x)	10.90	7.90	6.20	7.30
P/BV (x)	1.70	1.50	1.20	1.20
EV/EBITDA (x)	8.00	5.50	3.80	3.90
ROE (%)	17.10	19.80	21.20	16.50
ROCE (%)	16.30	19.10	20.50	16.20

I would buy CAIRN INDIA Ltd with a price target of Rs. 370 for Medium to Long term. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 312.00 on every purchase.
READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

Reliance Industries : A great wealth being created.

Scrip Code: 500325 / RELIANCE

CMP:  Rs. 992.05; Buy at Rs. 930 - Rs.950 for LT.
Short term Target: Rs. 1030.00, LT – Rs. 1350
Market Cap: Rs. 3,24,659.03 cr.
52 Week High/Low: Rs. 1149.70 / Rs. 885.10

Total Shares: 327,26,07,533 shares; Promoters : 146,39,23,343 shares – 44.73 %; Total Public holding : 58,60,93,502 shares – 17.91 %; Book Value: Rs. 392.21; Face Value: Rs. 10.00; EPS: Rs. 59.95; Div: 70 % ; P/E: 16.54 times; Ind P/E: 17.80; EV/EBITDA: 11.72 .

Total Debt: Rs. 62536.25 cr; Enterprise Value: Rs. 3,87,195.28 cr

Reliance Industries out put is of 1.8 bn cubic feet of gas a day which is equal to 1,25,000 barrels of oil production per day a nearly 40 % of India’s total gas production, all comes from D6. RIL owns 2,7o,000 Sq Kilometers of exploration circles or 28 blocks.

British Petroleum (BP) global oil major has announced an historic deal with India’s largest private sector oil major Reliance Industries to buy RIL’s 30% stake in 23 oil and gas blocks on 21^st February 2011. As per the partnership deal, BP will buy 30% stake in 23 oil & gas production sharing contracts that RIL operates in India, including the producing KG-D6 blocks at $7.2 billion (Rs.44.99/$) Rs. 32400 cr, and will also form 50:50 JV for sourcing and marketing gas in India. This JV is also an attempt to accelerate the creation of infrastructure for receiving, transporting and marketing natural gas in India. RIL will get $7.2bn in 3 trenches - $2 bn as upfront payment, further $2.3 bn on completion of deal & the final payment of $3 bn in October 2011. BP could invest US $20bn in RIL which would go to Reliance Gas Transportation Infrastructure Ltd. This deal is positive for RIL as the combined expertise of both the parties would result into optimisation of producing blocks and enhancing the resources in exploratory blocks. The transaction amount gives a value of Rs. 363/share to the east coast blocks, as BP is expected to incrementally incur its share of capital expenditure into the commercialisation and development of blocks, which have already been factored in for valuation.

Outlook and Valuation

The deal is an earnings & value accretive in the long term, considering the technical expertise BP brings on table. Once the deal goes through, dip in valuation on account of shedding 30% share in east coast blocks will be offset by cash consideration and re-rating of blocks on account of synergy arising out technical expertise of both the proficient parties. This deal will put RIL in a position to be “DEBT FREE”. My view on the stock is of BUY with a price target of Rs. 1,160 when the share price is at Rs. 957.00

Y/E March (Rs. Cr)	2009	2010	2011E	2012E
SALES (Rs. crs)	1,51,224	2,03,740	2,43,815	2,83,665
NET PROFIT (Rs. crs)	14,969	15,897	19,835	22,305
EPS (Rs.)	50.3	53.4	66.6	74.9
PE (x)	19.0	17.9	14.4	12.8
PRICE/BOOK (x)	2.3	2.0	1.8	1.6
EV/EBITDA (x)	15.6	11.8	9.3	8.1

Evaluation of RIL’s east coast blocks

Prospective Basins	Estimated 2P Reserves (mmboe)
KG - Basin	2,413
MA - Oil	150
NEC - 25	793
D3	884
D9	512
Total	4,751
Value given by British Petro.
Deal Value (Rs. Cr @ Rs. 45/$)	1,08,000
EV/Share (Rs.)	363

Union Budget 2011-12 -

In this budget finance minister proposed the Minimum Alternate Tax (MAT) on Special Economic Zones (SEZ) & Limited Liability Partnership (LLP) from 1^st April 2012. LLPs will have to pay MAT at 18.5 % but will be exempted from Dividend Distribution Tax of 17 % on the dividend declared. In LLPs MAT will be known as Alternate Minimum Tax (AMT). AMT will be applicable to LLPs @ 18.5 % AMT will apply to the adjusted income & not on adjusted book profit. AMT credit is available to an LLP for 10 years. The LLPs was used by some promoters of cooperates to save tax on dividends declared by their companies. RIL promoters created 29 LLPs in August 2010 which will own 32.75 % of Reliance Industries. These 29 LLPs collectively earned Rs.750.77 cr as dividend last year saving both MAT & DDT.  But when the new AMT norm becomes affective these LLPs will have to pay tax of Rs.139 cr if the RIL maintains the same dividend rates.

CLICK HERE FOR RIL SHARE HOLDING PATTERN

RELIANCE TREASURY STOCK SALES : BUZZZ....

RELIANCE INDUSTRIES

Scrip Name: RELIANCE INDUSTRIES

CMP: Rs.990;

Buy at Rs.950-1000 levels

Traget : Rs. 1130

Market Cap : Rs.318046 cr

52 Week High/Low : Rs.1129/Rs.910.30

Total Shares : 3270714336 shares; Promoters - 1463923343 shares - 44.74%

Book Value : Rs.392.41 ; Face Value - Rs.10; EPS - Rs.53.26;

P/E – 18.56; DIV (%)- 70%

Enterprise Value : Rs.1163.60 per share ; EV/EBITDA – 11.52;

There are the talks of Reliance selling its treasury shares worth Rs.3400 crs. About 4crs of treasury shares.Here are some of its past deals and the at present position of its treasury stocks..

DETAILS OF TRANSACTION

SEP 17 2009 – 1.50 cr shares @Rs.2125 = Rs.3188 cr in value a 0.91% of Stake.

(RIL bought at Rs.158 in year 2002)

JAN 04 2010 – 2.58 cr shares @Rs.1035 = Rs.2675 cr in value a 0.79% of Stake.

JAN 11 2010 – 3.30 cr shares @Rs.1050 = Rs.3465 cr in value a 1.00% of Stake.

A total of 7.38 cr shares @ Rs.9328 cr on an average of Rs.1263.95/share.

NAME OF SHAREHOLDER/SUBSIDIARY HOLDING RIL SHARES.

Reliance Universal Enterprise holding 5.69 cr shares (1.73%).

Reliance Polyelefins holding 6.12 cr shares (1.86%).

Reliance Chemicals holding 6.22 cr shares (1.89%).

Others holding 80 lakhs shares (.25%).

A total of 18.84 cr shares (5.73%). This also includes 12.05 cr shares or 3.67% held by Petroleum Trust.

At present RELIANCE has 30.89 cr shares (9.4%) of treasury stock including RIL shares held by its Subsidiary firms named above.NOW, at Current Market Price of Rs.1000 RIL’s Treasury stock are worth Rs.30,089 cr.

RIL's WEIGHT A HEADHEACHE TO FUND MANAGERS

India Index Services and Products (IISL), the NSE subsidiary which manages benchmark indices such as NIFTY came to know about difficulties to manage RIL weightage in index by fund managers. RIL is the largest market capitalization and with the highest weightage in Sensex & Nifty at 17.7% & 13.3% respectively.

The stock has being biggest contributor to the recent rally accounting to 861 pnts of the 3859 point Sensex up move. Fund managers both local & foreign, are taking a big hit in their portfolios for being significantly underweight on the counter, most of them are forced underweight by 500 bps. As per the SEBI rules local fund managers cannot bet more than 10% of their portfolio on a single stock. Foreign fund managers are bounded by mandates from their investor to stick to similar limits. Thus an average fund manager has lost nearly 2% returns on the underweight on just this stock. RIL’s size has begun to create problems for fund managers and is bound to increase. NSE is making the Nifty a free-float index which will add to its weight and also with completion of RPL merger will add up to 2% weightage. And it is possible that this bluechip giant may end up with a weight of 20%-plus on indices if it uses up its surplus cash for acquisitions. And suppose it does, India will have KOREA like situation where SAMSUNG INDUSTRIES accounts for a fifth or 20%-plus of the market. The most impact is that fund manager’s performance is benchmarked with Nifty and they cannot give more than 9.9% weightage to any stock, they have the risk of underperformance, and also none of the fund managers can take sells call, even if they have negative view on the stock because they are already underweight. A free market call on Reliance Industries is not possible and thus gives RIL a premium valuation.

In the recent rally, the stock outperformed the Sensex by huge margin. While the Sensex rose 47% between March 09 and May 13, the bluechip rose to 68%. This in turn, has taken its weightage up substantially on Nifty from 11% to 13.3% & on Sensex from 15.5% to 17.7%. In such situation, it depends on which way the index moves. If index is going up, then there is disadvantage. But when it fall the fund managers outperform because of under weight.

The only option is either to change the rules of 10% or follow MSCI and apply the 10/40 rule. This 10/40 methodology was introduced by MSCI indices in 2002. Accordingly the maximum weight of securities of a single issuer cannot exceed 10% of market value of the index, and the sum of the weights of all issuers representing more than 5% of the market value of the index cannot collectively exceed 40%.

Sensex from 1k to 21k : A HISTORY

1000, July 25, 1990

On July 25, 1990, the Sensex touched the magical four-digit figure for the first time and closed at 1,001 in the wake of a good monsoon and excellent corporate results.

2000, January 15, 1992

On January 15, 1992, the Sensex crossed the 2,000-mark and closed at 2,020 followed by the liberal economic policy initiatives undertaken by the then finance minister and current Prime Minister Dr Manmohan Singh.

3000, February 29, 1992

On February 29, 1992, the Sensex surged past the 3000 mark in the wake of the market-friendly Budget announced by the then Finance Minister, Dr Manmohan Singh.

4000, March 30, 1992

On March 30, 1992, the Sensex crossed the 4,000-mark and closed at 4,091 on the expectations of a liberal export-import policy. It was then that the Harshad Mehta scam hit the markets and Sensex witnessed unabated selling.

5000, October 8, 1999

On October 8, 1999, the Sensex crossed the 5,000-mark as the BJP-led coalition won the majority in the 13th Lok Sabha election.

6000, February 11, 2000

On February 11, 2000, the infotech boom helped the Sensex to cross the 6,000-mark and hit and all time high of 6,006.

7000, June 20, 2005

On June 20, 2005, the news of the settlement between the Ambani brothers boosted investor sentiments and the scrips of RIL, Reliance Energy, Reliance Capitaland IPCL made huge gains. This helped the Sensex crossed 7,000 points for the first time.

8000, September 8, 2005

On September 8, 2005, the Bombay Stock Exchange's benchmark 30-share index -- the Sensex -- crossed the 8000 level following brisk buying by foreign and domestic funds in early trading.

9000, November 28, 2005

The Sensex on November 28, 2005 crossed the magical figure of 9000 to touch 9000.32 points during mid-session at the Bombay Stock Exchange on the back of frantic buying spree by foreign institutional investors and well supported by local operators as well as retail investors.

10,000, February 6, 2006

The Sensex on February 6, 2006 touched 10,003 points during mid-session. The Sensex finally closed above the 10K-mark on February 7, 2006.

11,000, March 21, 2006

The Sensex on March 21, 2006 crossed the magical figure of 11,000 and touched a life-time peak of 11,001 points during mid-session at the Bombay Stock Exchange for the first time. However, it was on March 27, 2006 that the Sensex first closed at over 11,000 points.

12,000, April 20, 2006

The Sensex on April 20, 2006 crossed the 12,000-mark and closed at a peak of 12,040 points for the first time.

13,000, October 30, 2006

The Sensex on October 30, 2006 crossed the magical figure of 13,000 and closed at 13,024.26 points, up 117.45 points or 0.9%. It took 135 days for the Sensex to move from 12,000 to 13,000 and 123 days to move from 12,500 to 13,000.

14,000, December 5, 2006

The Sensex on December 5, 2006 crossed the 14,000-mark to touch 14,028 points. It took 36 days for the Sensex to move from 13,000 to the 14,000 mark.

15,000, July 6, 2007

The Sensex on July 6, 2007 crossed the magical figure of 15,000 to touch 15,005 points in afternoon trade. It took seven months for the Sensex to move from 14,000 to 15,000 points.

16,000, September 19, 2007

The Sensex scaled yet another milestone during early morning trade on September 19, 2007. Within minutes after trading began, the Sensex crossed 16,000, rising by 450 points from the previous close. The 30-share Bombay Stock Exchange's sensitive index took 53 days to reach 16,000 from 15,000. Nifty also touched a new high at 4659, up 113 points.The Sensex finally ended with its biggest-ever single day gain of 654 points at 16,323. The NSE Nifty gained 186 points to close at 4,732.

17,000, September 26, 2007

The Sensex scaled yet another height during early morning trade on September 26, 2007. Within minutes after trading began, the Sensex crossed the 17,000-mark . Some profit taking towards the end, saw the index slip into red to 16,887 - down 187 points from the day's high. The Sensex ended with a gain of 22 points at 16,921.

18,000, October 09, 2007

The BSE Sensex crossed the 18,000-mark on October 09, 2007. It took just 8 days to cross 18,000 points from the 17,000 mark. The index zoomed to a new all-time intra-day high of 18,327. It finally gained 789 points to close at an all-time high of 18,280. The market set several new records including the biggest single day gain of 789 points at close, as well as the largest intra-day gains of 993 points in absolute term backed by frenzied buying after the news of the UPA and Left meeting on October 22 put an end to the worries of an impending election.

19,000, October 15, 2007

The Sensex crossed the 19,000-mark backed by revival of funds-based buying in blue chip stocks in metal, capital goods and refinery sectors. The index gained the last 1,000 points in just four trading days. The index touched a fresh all-time intra-day high of 19,096, and finally ended with a smart gain of 640 points at 19,059.The Nifty gained 242 points to close at 5,670.

20,000, October 29, 2007

The Sensex crossed the 20,000 mark in just 14 days all because of huge FII's money inflows into large cap stocks making almost all of the to touch their highs. Index touched intraday high of 20,024 on the basis of DII's & Mutual Funds buying.

Huge buying in midcaps, small caps stocks like RNRL, RPL, ISPAT IND, IFCI etc

21,000, January 9, 2008

Sensex was in the range of 19,200 to 20,000 for 2 months and on 9th January 2008 the index touched to 21,000. This was on an excitment of Reliance Power IPO at Rs.440/sh.

Large caps such as Reliance Ind went to Rs.3050.50, Rel.Cap to Rs.2,695.50, Rel.Infra to Rs.2,654.35, Grasim Ind to Rs.3,400, Aditya Birla Nuvo to Rs.2,456.90.

The very next day Sensex touch to its all time high of 21,206.

On October 27, 2008 Sensex touched its lows of 7697.39 down 1003.68 points & Nifty at 2252.75 in intraday giving a closing of 8,509.56 down nearly 64% from its high due to global recession and selling pressures & 

MAY 18,2009 A two thousand point rally on the Sensex within sixty seconds was the day on which the world saw the largest intra day rise on any index anywhere in the world. The first time was after the Sensex hit the upper circuit, the second time it hit the upper circuit after two hours the roof almost came off!

SEBI had no choice but to suspend trading for the day. Investors were jubilant all day around the BSE.

THE RELIANCE RPL MERGER IN RATIO OF 16:1

The big piece of news from India’s corporate world this past weekend has been the merger of two companies under the Mukesh Ambani led Reliance Group. The news broke & developed over and was a done deal by the time the weekend was over. In every sense the affair has been handled in true Reliance style – quickly, efficiently and without making too much of a fuss. The integration of Reliance Petroleum Limited into Reliance Industries is being handled with a lot of care. Considering the ease with which Reliance has started to pull this off has been commendable.

The company has been careful enough to make sure that they do not get into the bad books of their shareholders.Tackling integration requires managing the priorities of both the companies being integrated. In this case the interests of the shareholders of both Reliance Industries and Reliance Petroleum have been safeguarded.

Mukesh Ambani in a statement was quick to point out that the deal would create “shareholder value”.

Shareholders themselves are pretty satisfied with the merger of Reliance Industries and Reliance Petroleum. They get to be part of a bigger entity with a much more simplified company structure.

Reliance Petroleum being the refining arm of Reliance Industries no longer needs to be kept separate from the company’s core business of oil and gas exploration and marketing.

By integrating the refinery business into the main fold they will be able to function as before with the petroleum wing being an internal subsidiary.

All that Reliance had to do was to simply re-purchase a 5% stake in Reliance Petroleum which until now belonged to Chevron. This being successful allows the company to increase its stake to seventy five percent in RPL thus making the merger a matter of detail.

RIL has agreed upon a price of Rs.60/share to buy Chevron’s stake in RPL. By no means has the company overpaid. In fact they’ve paid the IPO launch price for the stake. Shareholders can therefore be satisfied that the company has not overspent.

Reliance has also been fair with the share distribution ratio for RPL shareholders.The company has decided to fix the ratio of RPL to RIL shares at 16:1.

The ratio is a fair reflection of the current market value of both the companies.Therefore the shareholders have not been crossed in this matter as well.Small investors and fund managers alike agree on the ratio being a good deal thus the merger should not face any serious problems in the future.

RPL has just recently started commercial production. From a financial point of view it does depend on its parent company RIL for funds and easy credit access. The channel for credit being much simpler now that both companies come under the same name is a good move.

The RIL-RPL combine also catapults RIL higher into the list of the world’s biggest refining companies.Ironically RIL now replaces and gets ahead of Chevron which decided to exit its stake in RPL