Keep'em simple, Folks!!!

Reliance Industies Ltd - one of the pioneer industries of India, now demerged into 4 companies. The companies are new and yet to be listed in the markets. During the demerger that happened on Jan 18, each 100 shares of Reliance Industries Ltd (RIL) were divided into units of 100 each in Reliance Capital Ventures Ltd (RCVL), Reliance Energy Ventures Ltd (REVL), Reliance Natural Resources Ltd (RNRL) and Reliance Communication Ventures Ltd (RCoVL) in addition to the 100 RIL shares. Anil Ambani's board of directors had promised that these companies will be listed on February 13, February 20, February 27 and March 06 respectively. Ambanis are already behind the schedule and the latest press release says that RCVL will be listed on Feb 21 and no hints about the other companies. Not sure, if Reliance is really bothered about their promises not being fulfilled, but they seem to be a little worried about the names of these demerged companies and the name of the board which they are changin and changin and changing...

Okay, what does it mean for you and me? Let us say that I had 100 shares of RIL as on Jan 17. They were demerged to 100 RIL + 100 RCVL + 100 REVL + 100 RNRL + 100 RCoVL on Jan 18 and the demerged units were allocated to public before Jan 25. After the demerger, the shares of RIL which were quoting at Rs.950 levels were traded at Rs.690 to Rs. 710 levels. And a shareholder will no way be able to determine if he has gained from this demerger or not until the other four companies are listed and get settled after the initial listing fluctuations. Till then, the shareholder's money in these companies are locked down in a mystery of four boxes. Even poor Aladin has to wait for Anil to get the Genie out of the lamp. And is that all? No, after these companies are listed, RCVL will be merged with Reliance Capital Limited (RCL) on a ratio of five RCL shares for every 100 RCVL shares; REVL is merged with Reliance Energy Limited (REL) on a ratio of 7.5 REL shares for every 100 REVL shares. Adding some more suspense and spice to this, these companies are listed during the weeks of Union Budget'06 which again is going to a deterministic factor in the markets. Mr. Public can do nothing but keep his fingers crossed for the companies to be listed to get his locked down money in these shares.

Is this locking down a new technique? Not for Reliance. I was a so-called priviledged member (in 2003) of this Reliance India Mobile and only God knows my problems. My number got changed and I was still billed to my old number; my address got changed and still I was billed to my old address; my phone (handset) got changed but the upgrade cost was incorrect; so on and so forth. I was a regular customer care caller and it was a real fun when every customer rep would speak of a new terms and condition which the previous one wasn't aware of. I even had my weekly visits to the Reliance Web World and it was the same except that it too much crowdy up there and the sad part was when many people are standing there with so many complaints, Reliance was trying to convert web worlds into Jave cafes, merketting their cup of Coffee. One fine day, I decided to return my mobile and you know what? I was fined of breaking my 3-year lock down contract on a basis of Rs.40 each month for the remaining months. I don't want to speak about my another poor experience about Reliance Fixed Wireless phone (not really fixed!!!). The reason being the instruments of the mobile and the fixed phone and exclusively designed for Reliance to incorporate the CDMA technology. They were marketted as free and even a new born baby will say that it is not the case. The Reliance demerger, per Varma, is also a new invention. When there are Indian laws that insists that a demerger has to be in the benefit of the shareholder and should be profitable, Reliance has not demerged using the framework of delisting but using framework of IPOs.

Anil & Mukesh, you have a law-team who knows the in & out, loops and leisure of the Indian law terms and you come up with a legal contract (if not totally legal) which no one but your advocates can understand (not even your customer care reps). But do keep in mind that the end user of your product is not a corporate entity but Mr.Pothujanam (Mr.Public). So, my advice to you is "Always keep them simple".