Reliance Industries (RIL) will combine with Reliance Petroleum to create mammoth oil and gas giant with a projected top line, comprising nearly 20% of the combined turnover of the 30 companies in the BSE Sensex.

The 2 Companies said in separate statements on Friday evening that their respective boards will meet on March 2 to discuss a possible merger. The plan, when implemented, will further strengthen RIL’s position as one of India’s Top Companies and one of the world’s biggest producers of petroleum and petrochemical products.

The merged entity will become India’s biggest Company in terms of net profit over taking PSU major ONGC.

It will also create a much bigger balance sheet, which will help RIL raise money for working capital and for expansion.

The merged entity will be the sixth-biggest private sector refiner in the world with a total capacity of 1.2 million barrels per Day.

US based Chevron Corp will sell its 5% stake in RPL back to RIL for US $ 300 Million, according to Company insider. The sell will take place at pre-determined price of Rs.60 per Share.

Financials of RIL+RPL Merger -

Net worth of Reliance Industries – Rs.83,828 Crores

Net Worth of Reliance Petroleum – Rs.13,448 Crores

Size of the Company compared to IOC & ONGC

- RIL + RPL = Rs.2,33,092 Crores

- IOC = Rs.52,154 Crores

- ONGC = Rs. 1,47,830 Crores

Queries about the RIL+RPL Merger -

01) Why the Merger of RIL with RPL? What is the need of Merger?

RIL has traditionally set up large capital-intensive projects under new companies to ring-fence itself from project risk. This happened with the first Jamnagar Refinery, also called Reliance Petroleum. Now the RPL is up and running so it doesn’t make any sense to keep it separate.

02) What will be the Swap Ratio?

The Swap ration will be between 17:1 to 24:1 derived from the Book Value. Analysts say it could be around 20:1