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Reliance offers Rs 2 a share for AV Birla group stake in MRPL

George Smith Alexander & Hemangi Balse

Reliance Industries is understood to have offered Rs 2 a share to buy out the Aditya Birla group's 37.5 per cent stake in Mangalore Refineries and Petrochemicals Ltd, according to sources at financial institutions.

If the Birlas accept the offer, they will net around Rs 600 million, against their investment of around Rs 3 billion in MRPL's equity. The state-owned Hindustan Petroleum Corporation Ltd also holds a 37.5 per cent stake in the company.

Kuwait Petroleum and Oman Oil are also in the race to buy the Birla stake.

"It is our policy not to comment on rumour and speculation," a Reliance spokesman said. A senior executive of the A V Birla group denied any discussions with the Reliance group had taken place.

Earlier, HPCL had offered to buy out the Birlas for Rs 1.60 a share. Subsequently, the Birlas offered Rs 3.20 a share to buy out HPCL.

The massive debt-restructuring programme of MRPL will determine whether a deal will be struck. MRPL's debt is over Rs 54 billion.

At a meeting of heads of financial institutions on April 19, MRPL had sought a reduction in the loan principal and a moratorium on interest payments.

"Several options have been considered at the meeting. However, we will not reduce the principal. Besides the institutions, about 12 banks and several lenders are involved," an FI source said.

Institutional sources said the FIs were considering an option: to convert a third of the debt into equity, another third into an interest-free loan, and the remaining to be paid upfront. No decision was taken, sources added. The heads of the FIs will meet next month to discuss the debt-recast programme.

The Birlas have been planning to exit MRPL for some time. Earlier, petroleum minister Ram Naik had told Business Standard that HPCL agreed to cede management control to a third party if the Birla group sold its stake to it after raising it to 51 per cent. But the Birlas have ruled out fresh investments in the company.

The current market value of Birla's equity is close to Rs 2.18 billion, with the MRPL stock ruling at Rs 7.35 per share on the Bombay Stock Exchange. This is below Rs 4.16 billion (Rs 14 per share), jointly valued by SBI Caps and Arthur Andersen, the valuers appointed by the promoters of MRPL.

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