Professional Ideas

Bangalore,Reliance Retail Limited (RRL) announced the launch of a new specialty store “Reliance TimeOut” on Cunningham Road in Bangalore today. This store houses Books, Music, Stationery, Toys and Gifts. After the successful launch of Reliance Fresh, Reliance Mart, Reliance Digital, Reliance Trendz, Reliance Footprint, Reliance Wellness and Reliance Jewels, this is the 8th format of stores from Reliance Retail to be launched in India.

Spread over 21,000 sq feet and with over 56,000 products, Reliance TimeOut offers the customers an extensive range of merchandise in Books, Music, Stationery, Toys and Gifts. Reliance TimeOut is all set to revolutionize this business with its unique combination of wide product range and an exciting customer experience.

Commenting on the launch of Reliance TimeOut, Mr. Bijou Kurien, President and Chief Executive Lifestyle said “In today’s world, with all the pressures, stress and workload at office, home and school, we need a place where we can unwind and relax, where we can browse, buy a book, sample some music, choose a gift, buy a toy, or some exclusive stationery for ourselves. At Reliance Timeout, we offer a comprehensive range of products in these categories along with a fascinating customer experience in a warm, lively ambience”.

In Books, Reliance TimeOut has over 30,000 titles, sourced from National & International publishers. Recognizing customer preference for self-help and professional development the store has an impressive range of non-fiction books. Reliance TimeOut also has a range of Academic and Professional books and Vernacular books in 6 languages, apart from fiction, popular genres and a huge children’s section. To help enhance this experience the store has a kid’s wall, where kids can cuddle-up with a book. In Music and Movies Reliance TimeOut has over 12,000 titles sourced from leading international and national music companies. Listening pleasure is enhanced by the imported sound domes which provide hygienic sampling of music. Reliance TimeOut also has a Karaoke Studio where the customer can sing-along with a song of their choice and record it in a professional quality recording studio. There is also a cafe at the store, which makes Reliance TimeOut a wonderful hangout for youth and adults alike.

Searching for your favourite music and books is efficiently handled by a search engine and complemented by knowledgeable and energetic staff, so that customers can easily find what they want in a store of this size. The Stationery section with over 7000 products is a wonderland for children, students and working people. For the first time in India, Professional Artists too have an exciting range of products to buy their art supplies from. The professional series from Pebeo and Canson from France, Vinciana and RGM from Italy and Koh-i-noor from the Czech Republic and the Hobby Art products are truly exceptional. The Toy section with over 3,000 toys in an environment that is a lot of fun for the children will definitely make every outing to Reliance TimeOut, great fun for the family. The store also has over 4,000 products in gifts, watches, sunglasses and fragrances.Reliance TimeOut is truly a wonderful space to simply take time out! A wonderful world where a customer can Explore, Create, Imagine, Play, Unwind and truly call their own.

Reliance Retail Limited

Reliance Retail Limited, a 100% subsidiary of Reliance Industries Limited started rolling its stores in November last year and today operates over 418 stores in over 17 cities spanning 1.5 million Sq ft. The formats that RRL operates in are Reliance Fresh, Reliance Digital for consumer durables and information technology, Reliance Mart, a Hyper Market, Reliance Trendz – the apparel store, Reliance Wellness – offering wellness products, Reliance Footprint -a footwear store & Reliance Jewels -a jewellery store.

Reliance Industries Limited

Reliance Industries Limited (RIL) is India’s largest private sector company on all major financial parameters with turnover of Rs1,18,354 crore (US$ 27.23 billion), cash profit of Rs17,678 crore (US$ 4.07 billion), net profit of Rs11,943 crore (US$ 2.75 billion) and net worth of Rs63,967 crore (US$ 14.72 billion) as of March 31, 2007.

RIL is the first and only private sector company from India to feature in the Fortune Global 500 list of ‘World’s Largest Corporations’ and ranks amongst the world’s Top 200 companies in terms of profits. RIL is amongst the 25 fastest climbers ranked by Fortune. RIL also features in the Forbes Global list of world’s 400 best big companies and in FT Global 500 list of world’s largest companies.

The Finance Ministry has asked SEBI to look into the alleged irregularities in the Reliance Power IPO. This follows representations from a large number of people including MPs and MLAs. The public issue is awaiting clearance from SEBI.

The finance ministry now wants the regulatory to scan the irregularities related to the securities laws and the Companies Act mentioned by MPs, MLAs and some organisations. In a letter dated October 23, Mr. K P Krishnan, IAS, joint secretary in the ministry, has also asked for a report from SEBI on the irregularities mentioned in the representations sent to the ministry. The letter is addressed to SEBI chairman M Damodaran.

“I request SEBI to take appropriate action in the matter and send a factual note on this issue expeditiously,” says the letter. A copy of the communication has also been marked to the Company Affairs Ministry.

Recently, the Companies Affairs Ministry had also sent a similar communication to SEBI. The action by both ministries is likely to result in a thorough probe into irregularities in the Reliance Power IPO.

SEBI has already sought clarifications from the lead managers to the issue and clearance has not been provided so far. Among the allegations made by various sections is that the promoters have issued a huge volume of securities to themselves at par while asking investors for a premium.

A number of organisations including an Investors Forum raised the issued recently, but the Anil Ambani Group did not reply to the charges. Instead, it was alleged that Reliance Industries had launched a ‘vicious’ campaign against the IPO.

While the Anil Ambani Group has complained to the SEBI that RIL officials are behind the expose, the regulator has also received a large number of complaints from investors of Reliance Energy. The power projects of Reliance Energy have been transferred to Reliance Power in an effort to bring in business into the company, which was virtually a shell till recently. Reliance Energy stands to lose out due to the structure of the transaction while Anil Ambani’s wealth is expected to skyrocket at the cost of investors.

The finance ministry letter lists out the individuals and organisations submitting representations on the Reliance Power IPO. The ministry has asked for a SEBI probe to protect investor interest.

The Anil Ambani Group did not inform stock exchanges about transfer of power projects to Reliance Energy. Nor did it obtain clearance of shareholders for transfer of these project which will make Reliance Energy just a contractor for implementing projects.

Reforms has led to a spectacular improvement in economic performance in India and every one now aware that government target of reaching Gross Domestic Products (GDP) growth of 10 percent is achievable if economic reforms continue. India is definitely emerging as the first choice amongst investors including domestic investors, foreign investors, global financial institutions and international banks as the economy is booming and celebration is on international level. As results, everyday unlisted companies are trying to float IPOs.

India’s top thirty companies are most responsible for the noticeable jump in SENSEX and we are proud of them. But has anyone ever tried to sneak a look at the working in background of the companies, which file the prospectus with SEBI, seeking an approval for floating their IPOs?

Recently, a swindle being perpetrated by the promoters of Reliance Power Limited on the would be investors in the public issue of the company to enrich themselves at the expense of gullible public and how SEBI Guidelines are being subverted in a planned and scheming manner

According to SEBI’s guidelines, the promoter of unlisted companies (contributing their mandatory promoter’s contribution within the preceding one year) have to contribute in cash at the IPO price so that the promoters take the same financial risk as the IPO

investors. The issue at reference is the minimum “promoters contribution” to be brought in by the promoters – Reference clauses 4.1 to 4.6 of SEBI (Disclosure and Investor Protection) Guidelines, 2000. As per clause 4.1.1 the promoters shall contribute at least 20% of the post issue capital in a public issue by an unlisted company. As per clause 4.6.2 the promoters have to contribute this 20% at least at the IPO price if they have contributed this 20% during one year preceding the public issue.

SEBI guidelines have been blatantly subverted to perpetrate deception on the prospective investors in the IPO of Reliance Power Limited. Mr. Anil Ambani decides to float an IPO of Reliance Power Limited in last week of July 2007. Without risking his money in the project he still wants to retain majority control in Reliance Power.

The group had an existing shell company called Reliance Public Utility Private

Limited (RPUFL). RFUPL at that time had a paid up capital of Rs. 1 lakh. The authorized capital of RPUPL was increased to Rs 1000 crores by a resolution dated July 30, 2007. Mr. Anil Ambani’s personal investment company and Reliance Energy Ltd (controlled by Mr. Anil Ambani) invest Rs 500 cr each in the equity share capital of RFUFL on 3rd August 2007. RPUPL is still a shell company with just Rs 1000 crores of share capital and Rs 1000 cr investment. (The Rs 1000 cr investment will naturally be made only in Mr. Anil Ambani’s group companies. Thus no money would have gone out of the group).

Simultaneously, RPUPL and Reliance Power Limited pass necessary Board for merger of RPUPL into Reliance Power Limited. Both the companies file a scheme of amalgamation in the Bombay High Court in the first week of August 2007 i.e. immediately after infusion of Rs 1000 crores in RPUFL. The rationale of the merger, as stated in the Scheme of Amalgamation is “RPUPL has put in considerable efforts in acquiring necessary technical and manpower skills which are ancillary to the business of Reliance Power Limited. Reliance Power Limited can take benefits of this specialized skill sets and technology available with RPUPL to undertake mega power project and implement them more efficiently and successfully”,(One should be unable to understand as to from where the shell company having only 1 lakh capital till 31st July 2007 acquired the skill sets to implement mega power project. In fact REL which the one of the largest power companies in India was already a share holder in Reliance Power and Reliance Energy’s technical experience have been used by Reliance Power to bag mega power projects.). The High Court of Bombay approves the merger on 27th September 2007 and the order is filed with ROC on 29lh September 2007 making the merger of RPUPL into Reliance Power Limited effective from that date. On 30th September 2007, Reliance Power Limited allots 250 crores shares of Rs. 2 each to AAA Project Venture Private Limited and REL, who are the erstwhile shareholders of RPUPL.

As a result of this ploy, Mr. Anil Ambani and REL both acquire, on 30th September 2QO7, 250 crores shares of Reliance Power each for a consideration of Rs. 1000 crores only which was also infused into RPUPL only on 3d of August 2007 i.e. within one year prior to public issue. These 250 crores shares of Reliance Power which, have been allotted to Mr.Anil Ambani’s personal investment company and REL pursuant to the amalgamation apparently becomes eligible for exemption under clause 4.6.4 of SEBI (DIP) guidelines with respect to promoters contribution. Thus, Mr. Anil Ambani, as the promoter of Reliance Power, has avoided investing a huge amount as promoter’s contribution at the IPO price and passed on the entire risk of the project to the prospective Investors to his personal gains.

It is apparent that the High Court was not aware of the ulterior motives behind the merger of a RPUPL, a shell company into Reliance Power. The merger has been sanctioned by the High Court on the basis of the facts put before it and since the shares holders of both RTUPL and Reliance Power Limited would have approved the merger. The shareholders of both Reliance Power and RPUPL are only Sh. Anil Ambani’s investment companies and a representative of Reliance Energy. Reliance Energy owns 50% of Reliance Power. This merger proposal has never been taken to the shareholders of REL, who would have presumably questioned the need for and looked into the merits and demerits of the merger of a shell company into Reliance Power Limited.

Press reports state that Reliance Power plans to raise approximately Rs 8000 crores by issuing 130 crores equity shares of Rs 2 each. Thus the approximate issue price per equity share is expected to be Rs. 60 per share. Mr. Anil Amabni, as one of the promoters for his acquisition of 113 crores shares (10% of post issue share capital as per the prospectus) at a price of Rs. 50 per share should have invested Rs. 6780 crores. Against this, by misusing the exemptions in the SEBI guidelines intended for genuine merger, he has acquired this 10% by spending only Rs. 690 crores. In fact, the subscription by Mr. Anil Ambani of Rs, 8 crore share at the IPO price is an eyewash to divert public attention. Thus, at the expense of prospective investors Mr. Anil Ambani will gain approximately Rs. 6000 crores (assuming the IPO price to be Rs. 60 per share). In fact, as per clause 3.7.1 (i) SEBI guidelines, a company cannot make a public issue of Rs. 2 face value share at the price less than Rs. 500 each. Hence, in case, Reliance Power issues the shares at the price of Rs. 500 per share, Mr. Anil Ambani will gain upwards of Rs. 55,000 crores at the expense of the future investors of Reliance Power.

Thus the total loss will be to the prospective investors in Reliance Power will be Rs. 12.000 crores (assuming IPO price to be Rs 60 per share). If the IPO price is Rs. 500 as mandated by SEBI regulations, the loss to the prospective investors will be Rs.1,10,000 crores. In fact, the loss will be to the general public who will invest in the public issue and also to the public financial institutions and banks who will invest common man’s money in this public issue

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The above facts clearly point out a fraud being perpetrated on the investors and SEBI should immediately stop the public issue and not approve the prospectus. If SEBI approves this prospectus, it will be a disservice to the future investors in public issues adds SEBI would not be discharging its responsibilities in a proper manner. It will set a dangerous precedent. From now on every promoter in India would subvert SEBI (DIP) guidelines in the same manner and if SEBI approves this-prospec
tus, they can never in future disapprove any public issue made in the above manner. In fact, If this public issue is allowed, it may raise serious issues on the effectiveness of the regulatory framework of capital issues in Indian capital market

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The Department of Company Affairs should not also remain silent spectator in this issue and should make use of all the powers to stop this fraud poor gullible prospective investors in Reliance Power.