The Reliance settlement between the Ambani brothers, Mukesh and Anil, will see the creation of a new holding company that will own the controlling shares of Reliance Energy, Reliance Infocomm and Reliance Capital.
These are the businesses that are slated to go to Anil following the division of the group, scheduled to be announced early next month.
According to usually reliable sources, this new holding company will have the same shareholding as the existing Reliance Industries, so that no minority shareholder loses out in the split of the group.
This structure achieves two other objectives. First, there are no tax implications. And second, under Sebi rules the new holding company can get automatically listed on the stock exchange, since it has the same shareholding structure as the already listed Reliance Industries.
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The agreement is said to be that Mukesh and Anil will then buy out each other's shares in the two holding companies, with synchronised deals effected on stock exchange screens in order to avoid capital gains tax.
This will involve the holdings of group investment firms but would avoid having to untangle their complicated internal structures. Controlling ownership will then be aligned with management control in RIL as well as in the new holding firm.
Since Reliance Industries, which goes to Mukesh, will be valued at more than the new holding company, Mukesh will in effect have to pay Anil cash as part of the mutual transactions. The amount involved is not known, but informed sources have said it is substantial.
It is also not clear whether the two brothers have agreed on prior valuations for unlisted firms like Reliance Infocomm, which will form the basis for share swaps after the new holding company is listed, with compensating payments to be made in case the stock market price of the new company differs from what has been agreed on.
Even these payments, it is said, are tax-free if made as a gift to a relative.
Easing the split
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