Reliance buys stake in HDFC, ICICI Bank and Axis Bank

Awaiting regulatory approvals for its foray into financial services sector, Mukesh Ambani-led Reliance Industries has acquired shares in giants like HDFC, ICICI Bank and Axis Bank as part of long-term 'investments'.

These financial investments, estimated to be worth over Rs 1,200 crore (Rs 12 billion), include purchase of shares of six banks - three each from the public and private sectors -and one housing finance major, HDFC.

The banks whose shares Reliance Industries Ltd (RIL) has acquired also include HDFC Bank, SBI, Punjab National Bank and Canara Bank and these have been classified among 'long-term investments' of the country's biggest private sector company in its annual report for the year 2011-12.

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All shares in these seven companies were acquired last fiscal and their total value stood at Rs 1,233 crore (Rs 12.33 billion) as on March 31, 2012, and remains almost same at current prices.

RIL did not own any shares in these seven companies at the end of the previous fiscal, 2010-11.

Interestingly, the disclosure about share purchase in these companies comes along with an update by RIL in the annual report that its joint venture with global giant DE Shaw Group for financial services business was awaiting regulatory clearance to start operations.

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RIL had announced this JV in March 2011 "to build a leading financial services business in India".

No specific details have been disclosed so far about the business and products to be offered through this JV.

The report being sent to RIL shareholders ahead of their Annual General Meeting next month said, "This JV is awaiting necessary regulatory approvals for the commencement of business activities."

Meanwhile, RIL also said that it has submitted its reply to Sebi on show-cause notices issued in two cases by the capital market regulator, which oversees a large part of financial services sector in the country.

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The notices were issued in connection with the "sale of shares of erstwhile Reliance Petroleum Ltd and the allotment of equity shares of the company (RIL) to certain companies against detachable warrants attached to privately placed debentures issued by the company (RIL)," it said.

With regard to the equity investment in seven financial sector giants, the acquired shares account for very small stakes - ranging from 0.004-0.01 per cent.

Among these, RIL's holding of HDFC Ltd (1.44 crore shares accounting for about 0.01 per cent stake) were worth Rs 949 crore as on March 31, 2012, followed by 5.4 lakh shares of SBI (0.001 per cent stake) worth Rs 112 crore. The value of shares held in each of the other banks were in double digits.

Besides these seven financial services sector entities, where RIL made fresh investments in 2011-12, it has disclosed
equity investments in three other listed firms -- EIH Ltd, Den Networks and Himachal Futuristic Communications Ltd (HFCL).

RIL raised its holding of EIH Ltd from less than 14.8 per cent to 18.53 per cent during 2011-12, cut its exposure to Den
Networks to little over one per cent and kept its holding in HFCL unchanged at about four per cent.

The collective value of these three investments stood at Rs 1,503 crore at the end of 2011-12 fiscal, which included Rs
1,433 crore in Oberoi group hospitality giant EIH Ltd alone.

The investments in equity shares of unlisted companies included National Stock Exchange (85,000 shares worth Rs 28
crore), Air Control and Chemical Engineering Co, Parabool Enterprises BV, Shinano Retail Pvt Ltd, Teesta Retail Pvt Ltd, Reliance Apparel India Pvt Ltd and Terra Power LLC.

RIL further said that it has entirely sold off certain non-equity investments in listed debentures of Citi group,
whose total value stood at Rs 550 crore as on March 31, 2011.

On the other hand, RIL's investments in fixed maturity plan units of various mutual funds rose substantially from Rs
815 crore to Rs 3,624 crore.

RIL said that its total long-term investments rose by nearly two-third to Rs 11,423 crore, which included
investments worth about Rs 4,276 crore in its associates and Rs 7,147 crore for others.

In addition, RIL's 'current investments', which included mostly mutual funds, bank deposits, government securities and
corporate bonds, rose from Rs 14,685 crore to Rs 27,173 crore. The investment in bank deposits alone nearly tripled from Rs 4,632 crore to Rs 15,720 crore.

RIL's cash position stood at over Rs 70,000 crore at the end of 2011-12 fiscal, as against its total debt of about Rs
68,000 crore -- making it debt-free on net cash basis.

RIL further said that it has entirely sold off certain non-equity investments in listed debentures of Citi group, whose total value stood at Rs 550 crore as on March 31, 2011.

On the other hand, RIL's investments in fixed maturity plan units of various mutual funds rose substantially from Rs 815 crore to Rs 3,624 crore.

RIL said that its total long-term investments rose by nearly two-third to Rs 11,423 crore, which included investments worth about Rs 4,276 crore in its associates and Rs 7,147 crore for others.

In addition, RIL's 'current investments', which included mostly mutual funds, bank deposits, government securities and corporate bonds, rose from Rs 14,685 crore to Rs 27,173 crore. The investment in bank deposits alone nearly tripled from Rs 4,632 crore to Rs 15,720 crore.

RIL's cash position stood at over Rs 70,000 crore at the end of 2011-12 fiscal, as against its total debt of about Rs 68,000 crore -- making it debt-free on net cash basis.