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Reliance Industries Limited is India's largest private sector conglomerate company by market value.

Annual turnover of US$ 44.6 billion and profit of US$ 3.6 billion for the fiscal year ending in March 2010.
One of India's private sector Fortune Global 500 companies.

Ranked at 264th position (2009).

It was founded by the Indian industrialist Dhirubhai Ambani in 1966. Ambani has been a pioneer in introducing financial instruments like fully convertible debentures to the Indian stock markets.

Reliance Petroleum Limited was set up by Reliance Industries Limited (RIL). One of India's largest private sector companies based in Mumbai.

Currently, RPL is subsidiary of RIL, and has interests in the downstream oil business.
RPL also benefits from a strategic alliance with Chevron India Holdings Pte Limited, Singapore, a wholly owned subsidiary of Chevron Corporation USA (Chevron), which currently holds a 5% equity stake in the Company.


will never be a constraint in executing projects because Indian investors will provide me with the necessary resources."

- Dhirubhai Ambani, Former Chairman, RIL Group

IPO: September 1993 (for Jamnagar refinery expansion plan) Offering Details: TOCD issued of FV Rs. 60

TOCD breakup 2 Equity shares of Rs. 10 each Rs. 40 Non Convertible debentures with warrants (detachable)

Beneficial to the company as well as the investors.

They attributed its success to investor friendly image of the company.

It would help Reliance maintain Debt- Equity ratio at 1:1. TOCD was issued at a face value of Rs 60 with attractive payment schedule. The holders wont be paid any interest for first five years. They were provided with three options.

Rs. 20* Zero Date- (taken as Opening Date) 1993- Rs. 60- Rs. 10 After 18 Months Rs. 15 After 30 Months (Issue Price) Rs. 15 After 36 Months *It included two equity shares at the face value of Rs10 each. It accompanied by two detachable warrants which could be converted into an equity shares @ Rs 20/share.

Bonds Option 1 Retain

Warrants Sell *

Option 2 Surrender
Option 3 Retain


Outflow Inflow

Rs.60 Rs.(44 + 80 + 10)

Rs.60 Rs.(44 + 44)

Rs.(60 + 40) Rs.(80 + 44 +44)

* Warrants can be sold @ Rs. 5 in Sept 97 Share Price = Rs. 22/- as on Sept 97

Option 2
20 + 10/(1+k2)1.5 + 15/(1+k2)2.5 + 15/(1+k2)3= 44/(1+k2)4 + 44/(1+k2)4 Therefore, k2 = 16.32% (Approx.)


+ 10/(1+k3)1.5 + 15/(1+k3)2.5 + 15/(1+k3)3 +40/(1+k3) 4 = 20/(1+k3)6 +30/(1+k3)7 + 30/(1+k3)8 + 44/(1+k3)4 + 44/(1+k3)4

Substituting k in respective equations and Taking Share Price as Rs.X, 2X/(1+k1)4 + 20/(1+k1)6 + 30/(1+k1)7 + 30/(1+k1)8 + 10/(1+k1)4= 2X/(1+k2)4 + 2X/(1+k2)4 k1 = 17.7%, k2 = 16.32%

Solving for X, we get

X= Rs. 27 (Approx.)

Analyst views: Trading Value of the debenture - Rs. 48 and the probable warrant value Rs. 5 each in the market Against shares worth 40 in the case of surrender Result of Analysis: No investor will turn up to surrender the TOCDs

Higher conversion price for warrants(Rs.13.3) in comparison to MV of Rs. 20

Conversion of debenture to equity resulted in reduction of debt : equity ratio (lowering) RPL exercised the call provision and redeemed the convertible portion of O/S TOCDs. Again for reduction of Debt Equity ratio

TOCD Conversion to Equity Shares OR


Yield earned by an investor who exercised the option of converting NCD plus warrants into three equity shares sold them in September, 2002.

Present value=Rs. 40 69=40{1+(YTM/100)}9 Therefore, YTM= 6.25%

September, 1993 (NCD+ 2 warrants)

September, 2002 Sold for RS.69 (23*3)

Sept, 1993 (40+20)

May, 1998 Nov,1999 44(2 equity Equity shares) share=Rs.20 + 10(2 warrants)

Nov, 2000 Equity share= Rs.30

Nov, 2001 Equity Share=Rs. 30

60 = 54/{1+(YTM/100)}5 +20/{1+(YTM/100)}6 +30/{1+(YTM/100)}7 +30/{1+(YTM/100)}8

Therefore, YTM= 13.89%

Sept, 1993 (40+20)

May, 1998 (Rs.44)

Nov, 1999 (Rs. 50)

Nov, 2000 (Rs. 50)

Nov, 2001 (Rs. 30)

60= 44/{1+(YTM/100)}5 + 50/{1+(YTM/100)}6 +50/{1+(YTM/100)}7 + 30/{1+(YTM/100)}8

Therefore, YTM = 17.89%

April, 1998 (Rs. 58)

Nov, 1999 (Rs. 50)

Nov, 2000 (Rs. 50)

Nov, 2001 (Rs. 30)

58 = 50/{1+(YTM/100)}1 + 50 /{1+(YTM/100)}2 + 30/{1+(YTM/100)}3 Therefore, YTM = 60.18%

This case shows that convertible securities limits the risk of investors and benefits both the issuing company as well as the investors.