RUTH DAVID, FORBES.COM, FEBRUARY 27, 2007
MUMBAI – Reliance Industries, India’s largest company by market capitalization, is reportedly seeking $2 billon in financing from banks to develop a gas field off India’s east coast, and it may be maneuvering to acquire a global petrochemical giant.
The Times of India reported Tuesday that Chairman Mukesh Ambani was in a position to raise $6 billion to buy foreign firms in concert with private equity funds. According to unnamed sources, the target is either Dow Chemical or a U.S. refinery.
A Reliance spokesperson in Mumbai refused to comment on whether the company was planning to make an overseas acquisition.
Sources familiar with the matter denied that Dow Chemical was one of the acquisition targets.
The news added to the rumors swirling around Dow. Its shares rose sharply Monday following a report in the British Sunday Express that the blue-chip company could get a record takeover bid worth up to $54 billion from a consortium of private-equity firms. (See: ” Buyout Rumor Boosts Dow Shares”)
Separately, Reliance has reportedly asked banks to submit proposals by March 5 for a 10-year, $2 billion loan to help it develop the Krishna Godavari gas field. Reliance believes the field could produce as much as 80 million cubic meters of gas of day — almost as much as India currently consumes.
Reliance, which operates India’s largest refinery, is also spending $3 billion to build a petrochemical plant with a capacity of 2 million tons annually in western India.
This weekend, Reliance Industries said Ambani and his associates would buy warrants convertible into shares, prompting speculation that he plans to maintain a majority stake in case of a share sale.
Ambani and his associates, who own 50.62% of the company, will buy 120 million warrants convertible into an equal number of shares. That will boost share capital by 8.6%. The warrants will be convertible at a price of 1,402 rupees ($31.83) over 18 months.
Overseas acquisitions aside, Reliance, which has a market cap of $44 billion, needs billions of dollars for its domestic ventures. It is planning to sink $5 billion into the first phase of its push into the oil and gas industry, and it intends to invest $5.6 billion in retail ventures through 2011.
Reliance shares fell 0.2% Tuesday on the Bombay Stock Exchange to close at 1,404.95 rupees ($31.90).