Friday, November 02, 2007

Unlocking the value for shareholders

Unlocking the value for shareholders

Floomferg Fews Dated 03rd November 2007.

Reliance Energy is planning to separate Infrastructure projects as a separate company to 'unlock the value for shareholders', who are not already satisfied with the value, which is quoting at 40 times TTM earnings. Infact, unidentified sources close to Anil Ambani have said there are plans in the pipeline to 'unlock the value for shareholders' in several of the companies under the ADA group umbrella.

It was not confirmed, but people familier say -

Reliance Capital will separate its business into Insurance and non-insurance to unlock the value for shareholders.

Reliance Capital may further consider to separate its Insurance business into General Insurance and Life Insurance to unlock the value for shareholders.

However, this is not sufficient to unlock the value of its shareholders, hence it has plans to separate its Life Insurance business into 26 companies. Yes that is right - 26. Each of these companies will cater for people having initials starting from Letters A to Z. However, it remains to be decided whether first name of a person will be considered or his family name.

Company has further 'plans to unlock value for its shareholders' by splitting each of these 26 companies further into 22 companies, where each company will serve roughly the same area as is served by reliance communications, the Telecom arm of the group.

To 'unlock the value for shareholders' of Reliance Communications and other company Reliance Natural Resources Limited (which is quoting at merely 500 times its TTM earnings) every Insuree of Reliance Capital will get a free telephone connections from Reliance Communications subject to availability of spectrum and On Tap gas supply from Reliance Natural Resources Limited.

It is however being speculated that the Registrar of Companies does not have enough hard disk space on its servers to store the paper work required to register so many companies. Thus 'unlocking of shareholders value' may hold roadblocks if the RoC does not upgrade its infrastructure quickly.

ADA officials declined to comment on the 'market speculations'.

Investors responded positively to the news. Shares of Reliance energy rose 4.62 percent. Shares of Reliance Natural Resources rose 13 percent. However the same optimism was not seen in the shares of Reliance Communications whose shares were down three-fourth of a percent where the 50 percent benchmark index is up by 1.7 percent. Shares of Reliance Capital also posted a modest increas of three fourth of a percent.

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