India's Reliance Capital board member opposes to equity sale

SINGAPORE (CNI)--India's Reliance Capital Ltd (RCL) director Amitabh Jhunjhunwala has expressed his opposition against the company's divestment of its 50% equity in Reliance Petroinvestments Ltd (RPL), according to local media reports on Tuesday.

RPL in turn holds a 46% equity in Indian Petrochemical Corp Ltd (IPCL). RCL's board meeting being held on Tuesday is expected to discuss the opposition to the divestment of RPL share. The board also comprises Anand Jain, a bete noire of Anil Ambani, and Jhunjhunwala is a close friend of Anil Ambani.

In a statement, RCL clarified that that it had invested Rs44.4m in the equity of RPL, which in turn invested Rs26.39bn to buy 112m IPCL shares at Rs231 per share.

RPL had borrowed Rs25.79bn from Reliance Industries Ltd (RIL). ‘‘The net asset value of Reliance Petroinvestments Ltd share was less than its par value since it had invested in the shares of IPCL at Rs231 per share against the present market value of Rs160 per share,’’ the statement said.

"Reliance Capital, therefore, decided to sell these shares at par to companies, Reliance Pharmaceuticals Pte Ltd and Reliance Nutraceutical Pte Ltd, whose ultimate economic benefit accrues to RIL," the statement said.

"RCL shareholders therefore have not lost in this transaction,’’ it said. ‘‘The loss in the consolidated accounts of Rs871m was on account of the reversal of the profits earlier reflected in the consolidated accounts in the previous two years. It does not affect the stand-alone results of RCL declared either in the earlier years or in the current year."

"This entry of consolidated accounts is to comply with the accounting standards on consolidation," it added. RCL, meanwhile, reported a sharp drop of 79.18% in its consolidated net profit for the fiscal ended March 31, 2005 at Rs 359m against Rs1.72bn in the previous fiscal year.