Reliance Industries may consider reorganizing company to list subsidiaries for succession plan: report | Techno Glob

Billionaire Mukesh Ambani’s Reliance Industries Ltd may explore reorganizing the company into three independent entities for different business areas as it prepares to list subsidiaries and induct the next generation of the founding family into key roles, according to a report.

According to a report by Kotak Institutional Equities, this would help prevent any holding company downgrades in Reliance as it lists its subsidiaries, prepare for a possible change in management, and prevent tie-ups between the entities as it develops. and as they become independent listed entities.

India’s most valuable company has three distinct businesses: oil refining and petrochemicals in the petroleum-chemicals (O2C) unit, digital businesses including telecommunications, and retail.

“Reliance can explore the reorganization of the company into three independent entities for its three different business segments as it prepares to list its subsidiaries and induct the next generation members of the founding family into key roles” , says the report.

Company management and shareholders may consider corporate reorganization to achieve three mutually related goals of structure, succession and segregation.

“One option could be to reorganize Reliance into three independent publicly traded verticals (communications, energy and retail). Minority interests of these entities can be clubbed into any of the appropriate verticals to ensure limited overlap after restructuring,” he said.

At the company’s annual shareholders’ meeting last month, Ambani identified twin children Akash and Isha for digital and retail respectively, and youngest son Anant for the energy sector.

“We note that our hypothetical structure of three independent listed entities instead of four listed entities (Reliance + three listed subsidiaries in communication, energy, distribution) or three listed entities (Reliance + two listed subsidiaries in communication and distribution) will preclude possible large stakes handing over from the company for shares of Reliance relative to the value of its assets in the parent entity and stakes in various subsidiaries.This has been the fate of several holding companies and operating and portfolio,” Kotak said.

He was of the view that the ‘new’ Reliance would be better placed to handle the ‘new’ world with rapid change and disruption as the company enters the next phase of its corporate life under the new management.

“Reliance is an incredibly complex entity and its breadth and size of operations across different businesses demonstrates the founding family’s exceptional management abilities over the past decades. Nevertheless, growing external challenges (rapid pace of technological change and disruption ) and internal complexity (the company is a massive conglomerate) may require smaller, specialized entities with distinct purposes and operations,” he said.

The new structure, he said, will provide a cleaner framework for retail and telecommunications companies as they register. “Shareholders would likely prefer limited related party transactions between various listed entities and some may even prefer ‘cleaner’ structures as a pre-requisite to investment. There is currently significant overlap between the media business, from sale to retail and telecommunications,” he added.

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