A

COMPREHENSIVE PROJECT REPORT

ON

IMPACT OF MERGER & ACQUISITION ON STOCK PRICE

-: Submitted To:INDU MANAGEMENT INSTIRUTE
Ankodia, Vadodara
Collage Code: 916

Under The Guidance Of

Mr.Divyesh
[ASSISTANT PROFESSOR]
IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR
THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION (MBA)
-: OFFERED BY :GUJARAT TECHNOLOGICAL UNIVERSITY
AHMADABAD
-: PREPARED BY:STUDENTS OF
MBA (SEMESTER - IV) JULY 2014

Mr. Piyush Vara

Enrollment No
127190592029
1

ACKNOWLEDGEMENT
A single flower cannot make a garland or a single star can not make the beautiful
shiny sky at the night, same way a research work can never be outcome of a
single individuals talent or efforts. It is just like climbing a high peak, step by step,
accompanied with bitterness, hardships, frustration, encouragement and trust
and with so many peoples kind help. When I found myself at the top enjoying
beautiful scenery, I realized that it was, in fact, teamwork that got me there.
Though it will not be enough to express my gratitude in words to all those people
who help me, I would still like to give my heartbound thanks to all these people.

First of all, I would like to give my sincere thanks to my guide, Professor Mr.
Divyesh Patel

Thank you is a small word to my Parents, , and my sister who not only supported
me, but also inspired me, during the course of my study. It was their blessings
that gave me courage to face the challenges and made my path easier.

Last, but not the at least, I would like to thank Dr. Manish Vyas , Director of my
institution - Indu Institute of Management, Vadodara where I am student.

STUDENT DECLARATION
I Piyush J. Vara is student of INDU INSTITUTE OF MANAGEMENT STUDIES Baroda,
hereby declare that this project report entitled IMPACT OF MERGER &
ACQUISITION ON STOCK PRICE.
I declare that this submitted work is done to the best of our knowledge. No such
work has been submitted by any other person or collages.
I also declare that all information collected from various secondary sources has
been duly acknowledged in this project report.

Place:

Signature

Date: . /. /

_____________

(Piyush J Vara)

PREFACE
As MBA students our main aim should not be only to learn theoretical concepts in
the classroom, but it becomes more as how we apply those concepts in practical.
We really know that there is no use of knowledge without getting the practical
knowledge that make the man perfect and understand

At the present, the world is running very fast. We are coming across many
modern theories and implementation of machineries, to start new business. We
must have the knowledge of theories and practical, through it, the student can
able know about how to apply their mind in the real business world.

We have tried our best to prepare this project but it there is any mistake, we
request you to overlook upon the fact as this is our sincere attempts to perceive
thing in proper way. In the subject identification of need of every person role,
functions, policy and all procedure of functions is input.

TABLE OF CONTENTS

SR. NO.

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2
3
4
5
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7
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10
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14
15
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18
19
20
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PARTICULARS
DECLARATION
PREFACE
AKNOWLEDGEMENT
Executive Summary
GENERAL IMFORMATION
Introduction of Reliance
Reliance Industry
Reliance Petroliem
INTRODUCTION OF THE TOPIC
Introduction of Merger & Acquisition
Definition of M&A
Literature Review
Research Problem
Research Objective
Hypothesis
RESEARCH METHODOLOGY
Research Design
Population & Sample
Sampling Method
Collection of data
Scheme of Amalgamation under sec 391 to 394
of the Companies Act,1956
Testing of Hypotheses
Results & findings
Scope of the study
Limitation of the study
conclusion
References

PAGE NO.

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11
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EXCUTIVE SUMMARY
The executive summary is the most important part of the research work. Very often,
executives go through the executive summary only. Thus, it must be capable of
providing the information presented in the report is a summarised form. It is divided
into the 5 parts which are

OBJECTIVE OF THE STUDY:

The main objective of this research on impact of merger & acquisition on stock price
is to know the changes in prices of stocks due to merger and acquisition.
To know the involvement of various stakeholders into the merger decisions
.
To analyze if the company undergoes due diligence process during the
merger.
To study the management philosophy with respect to merger of all the 4
company under research.
To know which strategic decision in M&A affect the changes in stock prices
Studying the triggering factor leading to decision of M&A.

CONCISE STATEMENT:

As in this report the main purpose is to check the impact of merger & acquisition on
stock price.
For that purpose we have taken all Indian merger & acquisition as our population
and in which the merger of Reliance industries Ltd with Reliance Petroleum Ltd is
taken as our sample for the purpose of research methodology.
For conducting research methodology we have created two hypotheses. Which are
as follows.

HYPOTHESIS-1

H0: There is no significance difference on the stock price of the company before
and after the merger
H1: There is significance difference on the stock price of the company before and
after the merger
To prove this hypothesis we have applied paired t-test.
For that purpose we have taken stock prices of Reliance Industries Ltd.
before 20 days of merger and after 20 days of merger.
And the result arrived in this hypothesis is.

P(T<=t) one-tail

0.24640719

t Critical one-tail

1.729132792

P(T<=t) two-tail

0.49281438

t Critical two-tail

2.09302405

HYPOTHESIS-2

H0: M&A decision does not impact on company

H1: M&A decision does impact on company

To prove this hypothesis we have applied co-relation.

For that purpose we have taken Earning Per Share of Reliance Industries
Ltd. before 6 years of merger and after 6 years of merger.
And the result arrived in this hypothesis is.

Column 1
Column 1

Column 2

0.930483

Column 2

RESULTS AND FINDINGS:

In this project work whole research methodology is done for the purpose of
analysing that impact of merger and acquisition on stock prices are arrived
or not.
For that in first hypotheses t cal > t tab so, null hypothesis is rejected. So we
can say that there is a significance change into the stock price of the
company because of merger and acquisition.
In second hypothesis correlation coefficient between the EPS of the
Reliance Industry before and after merger is +0.093. This indicates that
merger and acquisition are strongly correlated with the EPS of the company.
It means that merger and acquisition decision effects on the EPS of the
company.
RIL among top 10 private sector refining companies globally
Will own 2 of the worlds 3 largest, most complex modern refine
Will be the worlds largest producer of ultra-clean fuels at a sing location

CONCLUSION

This merger is Indias largest ever merger.

RPL shareholders to get 1 share of RIL for every 16 shares of RPL.
RILs holding in RPL to be cancelled.
No fresh treasury stock created.
Merger to unlock greater efficiency from scale and synergies.
Merger to be EPS accretive; AAA rating reaffirmed by CRISIL. RIL to have 3.7
million shareholders

10

GENERAL IMFORMATION

11

INTRODUCTION OF RELIANCE

The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is India's

largest private sector enterprise, with businesses in the energy and materials
value chain. Group's annual revenues are in excess of US$ 66 billion. The
flagship company, Reliance Industries Limited, is a Fortune Global 500
company and is the largest private sector company in India.

Backward vertical integration has been the cornerstone of the evolution and
growth of Reliance. Starting with textiles in the late seventies, Reliance
pursued a strategy of backward vertical integration - in polyester, fibre
intermediates, plastics, petrochemicals, petroleum refining and oil and gas
exploration and production - to be fully integrated along the materials and
energy value chain.

The Group's activities span exploration and production of oil and gas,
petroleum refining and marketing, petrochemicals (polyester, fibre
intermediates, plastics and chemicals), textiles, retail, infotel and special
economic zones.

Reliance enjoys global leadership in its businesses, being the largest po lyester
yarn and fibre producer in the world and among the top five to ten producers
in the world in major petrochemical products.

Major Group Companies are Reliance Industries Limited, including its

subsidiaries and Reliance Industrial Infrastructure Limited.

12

RELIANCE INDUSTRIES
Type:-

Public

Traded as:-

BSE: 500325,
NSE: RELIANCE,
LSE: RIGD
BSE SENSEX Constituent
CNX Nifty Constituent

Industry:-

Conglomerate

Predecessor(s):-

Reliance Commercial Corporation

Founded:-

1966

Founder(s):-

Dhirubhai Ambani

Headquarters:-

Mumbai, Maharashtra, India

Area served:-

Worldwide

Key people:(Chairman and MD)

Mukesh Ambani

Products:-

Crude oil, natural gas, petrochemicals, petroleum,

polyester, textiles, retail, telecom

Revenue:-

US$ 73.10 billion (2013)

Operating income:-

US$ 7.14 billion (2013)

Net income:-

US$ 3.86 billion (2013)

Total assets:-

US$ 58.67 billion (2013)

Total equity:-

US$ 31.66 billion (2013)

Employees:-

23,519 (2013)

Website:-

www.ril.com
13

IL is the second-largest publicly traded company in India by market

capitalisation and is the second largest company in India by revenue after the
state-run Indian Oil Corporation. The company is ranked No. 107 on the
Fortune Global 500 list of the world's biggest corporations, as of 2013. RIL
contributes approximately 14% of India's total exports.

The number of shareholders in RIL is approx. 3 million. The promoter group,

Ambani family, holds approx. 45.34% of the total shares whereas the
remaining 54.66% shares are held by public shareholders, including FII and
bodies corporate. Life Insurance Corporation of India is the largest nonpromoter investor in the company with 7.98% shareholding.

The company's equity shares are listed on the National Stock Exchange of India
Limited (NSE) and the BSE Limited. The Global Depository Receipts (GDRs)
issued by the Company are listed on Luxembourg Stock Exchange. It has issued
approx. 56 million GDRs wherein each GDR is equivalent to 2 equity shares of
the company. Approx. 3.46% of its total shares are listed on Luxembourg Stock
Exchange. Its debt securities are listed at the Wholesale Debt Market (WDM)
Segment of the National Stock Exchange of India Limited (NSE).

It has received domestic credit ratings of AAA from CRISIL (S&P subsidiary) and
Fitch. Moodys and S&P have provided investment grade ratings for
international debt of the Company, as Baa2 positive outlook (local currency
issuer rating) and BBB+ outlook respectively.

14

RELIANCE PETROLEUM
Type:-

public company (BSE: 532743)

Industry:-

Petroleum and Gas

Founded:-

2008

Headquarters:-

Ahmedabad, India

Key people:-

Mukesh Ambani

Products:-

Petroleum

Revenue:-

INR36.78 billion (US$610 million)[1]

Parent:-

Reliance Industries

Website:-

www.reliancepetroleum.com

Reliance Petroleum Limited was set up by Reliance Industries Limited (RIL),

one of India's largest private sector companies based in Ahmadabad. 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.

Refining activities of Reliance Industries Limited are carried out at the

Jamnagar refinery complex with refining capacity of 1,240,000 barrels per day
which is 65 million tonnes per annum.

The refinery is able to process a wide variety of crudes- from very light to very
heavy (from 18 to 45-degree API) and from sweet to very sour (with sulphur
content from 0 to 4.5%).

15

RPL commenced its crude processing on 25 December 2008. The secondary

processing units are now under synchronisation and commissioning. The entire
refinery complex is expected to attain full capacity shortly.

With an annual crude processing capacity of 580,000 barrels (92,000 m3) per
stream day (BPSD), RPL will be the sixth largest refinery in the world. It will
have a complexity of 14.0, using the Nelson Complexity Index, ranking it one of
the highest in the sector. The polypropylene plant will have a capacity to
produce 0.9 million metric tonnes per annum.

The refinery project is being implemented at a capital cost of Rs 270,000

million being funded through a mix of equity and debt. This represents a
capital cost of less than US$10,000 per barrel per day and compares very
favourably with the average capital cost of new refineries announced in recent
years. The International Energy Agency (IEA) estimates the average capital cost
of new refinery in the OECD nations to be in the region of US$15,000 to 20,000
per barrel per day.[citation needed] The low capital cost of RPL becomes even
more attractive when adjusted for high complexity of the refinery.

16

INTRODUCTION OF THE TOPIC

17

INTRODUCTION OF TOPIC
MERGER & ACQUISITION:
New patterns of globalization are accelerating the internationalization of
industry and reshaping industrial structure at global level.
The international activities of firms now extend far beyond traditional
forms of trade and investment.
Cross border mergers and acquisitions (M&as) and strategic alliances are
common paths to internationalizing operations, research and markets.
Whereas firms previously expanded geographically through foreign trade
and investment, they now pursue innovative international strategies for
complete restructuring of their operations.
And, more than before, their exports and imports, mergers, alliances and
other investments are interlinked.
It is the intensity and multiplicity of these international transactions that
are creating a new worldwide economic system.
Declining computing, communications and transport costs, coupled with
regulatory reform and trade and investment liberalization, have prompted
firms to adopt global strategies.
Information and communications technologies (ICTs) have greatly lowered
transaction costs within and between firms.
At the same time, governments have deregulated and privatized vast
sections of industry and opened up their borders to foreign entities.
Changes in the structure of industry, from manufacturing to services and
from lower to higher value-added activities, have led to overcapacity in
some sectors and intense competition in others.
18

 In this environment, firms need to restructure to enhance flexibility. And

they are using competition and co-operation as dual paths to growth.
Cross-border M&as are now the largest component of foreign direct
investment (FDI).
Firms are buying and selling assets and diverse operations and activities
rather than investing in Greenfield plants.
If we talk about India, India is an emerging vibrant player in the world of
mergers and acquisitions (M&A).
Like the merger of reliance industries have too many mergers with other
companies and its sister concerns.
There are many merger are taken place in India like Tata-Corus, ArcelorMittal etc.

19

DEFINITION:
According to Samuels and Wikes,
If two companies amalgamate, they both surrender their separate identity and a
new company is formed, it is a merger
According to Hunt,
The term merger implies a combination of two or more formerly independent
business units into one organization with a common management and ownership
According to Robert N. Anthony,
An acquisition can be defined as series of transactions where by a person or
group of individuals or company acquires control over the assets of a company,
either directly or indirectly by obtaining control of the management of the
company.
A company purchases a sufficient number of shares of another company so as to
acquire controlling interest in another company, it is known as acquisition.

20

LITERATURE REVIEW
Beitel and Schiereck (2001) examined the value implications of 98 large
M&as of publicly traded European banks that occurred between 1985 and
2000. They found that for the entire sample the shareholders of targets
earned significant positive cumulated abnormal returns in all intervals
studied, while the shareholders of the bidding banks did not earn significant
cumulated abnormal returns. From a combined view of the target and the
bidder, European bank M&As were found to significantly create value on a
net basis.
The study of Beitel, Schiereck and Wahrengoug (2002) builds on and
extends the study of Beitel and Schiereck (2001) by examining the same
data set but with a different objective. They analysed the impact of 13
factors that include relative size, profitability, stock efficiency, market-tobook ratio, prior target stock performance, stock correlation, M&Aexperience of bidders and the method of payment on M&A-success of
European bank mergers and acquisitions, in an attempt to identify those
factors that lead to abnormal returns to target shareholders, bidders
shareholders, and the combined entity of the bidder and the target around
the announcement date of M&A. Results showed that many of these factors
have significant explanatory power, leading the authors to the conclusion
that the stock market reaction to M&A-announcements can be at least
partly forecasted.
Acharya and Malik (2008) examined the Indian market and tested stock
price reaction of both the target and the acquiring companies which may
have been caused by information related to a merger activity using a
traditional event-study residual analysis. Their study indicated that there
were abnormal returns which are stimulated by activities that are
concerned with business combinations. The result was supported by Wong
and Cheung (2009) wherein it was concluded that the acquiring companies
would experience positive effects on stock price.

21

 Andrade, Mitchell and Stafford (2001) state that two of the main objectives
in corporate finance research are the measurement of value creation or
destruction through mergers and acquisitions, and how this value creation
or destruction is distributed between the acquiring company and the target
company.
De Franco et al. (2008) explain that If this information uncertainty cannot
be eliminated at a minimal cost through additional information acquisition
as part of the due diligence process, then acquirers will require a higher rate
of return .This higher required rate of return will reduce the target rms
valuation.
A survey for evidence for decision maker by Bruner (2002), a published
meta study on post acquisition performance research that included 44
acquiring firm abnormal share price return event studies for the period
from 1978 to 2001, concluded that on average acquiring firms earned no
abnormal price returns post acquisition.
Marina Marty nova, Sjoerd Oosting and Luc Renneboog (2007) studied the
long-term profitability of corporate takeovers in Europe, and found that
both acquiring and target companies significantly outperformed the median
peers in their industry prior to the takeovers, but the profitability of the
combined firm decreased significantly following the International Journal of
Innovations in Engineering and Technology (IJIET) takeover. However, the
decrease became insignificant after controlling for the performance of the
control sample of peer companies.

Though the theoretical assumption says that mergers improve the overall
performance of the company due to increased market power and synergy
impacts, Tambi uses his paper to evaluate the same in the scenario of
Indian economy. He has tested three parameters PBITDA, PAT and ROCE for any change in their before and after values by comparison of means
using t-test. The results of his study indicate that mergers have failed to
contribute positively to the set of companies chosen by him.
22

RESEARCH PROBLEM
To know the impact of merger and acquisition on stock prices that is
prior the merger and acquisition and post the merger and acquisition.

23

RESEARCH OBJECTIVE
PRIMARY OBJECTIVE:
The main objective of this research on impact of merger & acquisition on stock
price is to know the changes in prices of stocks due to merger and acquisition.

SECONDARY OBJECTIVES:
To know the involvement of various stakeholders into the merger decisions.
To analyze if the company undergoes due diligence process during the
merger.
To study the management philosophy with respect to merger of all the 4
company under research.
To know which strategic decision in M&A affect the changes in stock prices
Studying the triggering factor leading to decision of M&A.

24

HYPOTHESIS
HYPOTHESIS-1

H0: There is no significance difference on the stock price of the company before
and after the merger

H1: There is significance difference on the stock price of the company before and
after the merger

HYPOTHESIS-2

H0: M&A decision does not impact on company

H1: M&A decision does impact on company

25

RESEARCH METHODOLOGY

26

RESEARCH METHODOLOGY

The business environment is always uncertain and there is a need to handle this
uncertainty by developing a pool of information in a scientific manner. For that
research work is most important. In which business researcher systematically
collect, compile, analyze, and interpret the data to provide quality information.

So, to arrive at a final decision there is a need of research methodology is a

process of identification of problem, data collection, data analysis and
interpretation of the data.

RESEARCH DESIGN
In this research secondary data which is collected from..
BSE
NSE
CHARTS
EXCEL SHEET
BALANCE SHEETS
ANNUAL REPORTS

27

POPULATION
To calculate the hypothesis we have taken all merger and acquisitions of India as
our population.

SAMPLE
Our samples are
Merger of Reliance Industries Ltd and Reliance Petroleum Ltd

SAMPLING METHOD
For this research work we have used Paired t-test and Correlation methods of
sampling.

28

COLLECTION OF DATA

After the research design, research method and Sampling procedure is decided,
the next main step is Collection of Data for related study with the help of
Research Method decided.
Data can be collected in two ways.
1) Primary data collection
2) Secondary data collection

Secondary Data play major role in any report. In this report the data is collected
from different sources of secondary data like:
Journals
Books
Magazine
Internet
Brochures
Research papers

29

SCHEME OF AMALGAMATION
UNDER SECTIONS 391 TO 394 OF THE COMPANIES ACT, 1956
OF
Reliance Petroleum Limited (the Transferor Company)
WITH
Reliance Industries Limited (the Transferee Company)
A.

Description of Companies

I.
Reliance Petroleum Limited (RPL or the Transferor Company) is a
company incorporated under the Companies Act, 1956 having its Registered
Office at Motikhavdi, P.O. Digvijaygram, District Jamnagar, Gujarat 361140,
India. RPL was formed with the objective of harnessing the emerging
opportunities in the global energy sector by setting up a 5,80,000 barrels of crude
oil per stream day Greenfield petroleum refinery and a 0.9 million tonnes per
annum polypropylene plant in a Special Economic Zone in Jamnagar, Gujarat and
has commenced refining of crude.
II.
Reliance Industries Limited (RIL or the Transferee Company), is a
company incorporated under the Companies Act, 1956 having its Registered
Office at 3rd Floor, Maker Chambers IV, 222, Nariman Point, Mumbai - 400 021.
The Transferee Company is one of Indias largest private sectors industrial
enterprises in terms of net turnover, total assets, net worth and net profit and is a
Fortune 500 company. RIL ranks amongst the worlds top 10 producers for almost
all its products and also operates a 6, 60,000 barrels of crude oil per stream day
refinery in Jamnagar, Gujarat which is one of the largest complex refineries
globally.
III.

The Transferor Company is a subsidiary of the Transferee Company.

IV. This Scheme of Amalgamation provides for the amalgamation of the

Transferor Company with the Transferee Company pursuant to Sections 391 to
394and other relevant provisions of the Act.
30

B.

Rationale for the Scheme/ benefits

The amalgamation of the Transferor Company with the Transferee Company

would inter alia have the following benefits:
Greater integration and greater financial strength and flexibility for the
amalgamated entity, which would result in maximizing overall shareholder value,
and will improve the competitive position of the combined entity.
Greater efficiency in cash management of the amalgamated entity, and
unfettered access to cash flow generated by the combined business which can be
deployed more efficiently to fund organic and inorganic growth opportunities, to
maximize shareholder value.
Improved organizational capability and leadership, arising from the pooling of
human capital that has the diverse skills, talent and vast experience to compete
successfully in an increasingly competitive industry.
Benefit of operational synergies to the combined entity in areas such as crude
sourcing, product placement, freight optimization and logistics, which can be put
to the best advantage of the stakeholders.
Greater leverage in operations planning and process optimization and enhanced
flexibility in product slate.
Cost savings are expected to flow from more focused operational efforts,
rationalization, standardization and simplification of business processes,
productivity improvements, improved procurement, and the elimination of
duplication, and rationalization of administrative expenses.
Strengthened leadership in the industry, in terms of the asset base, revenues,
product range, production volumes and market share of the combined entity.
The amalgamated entity will have the ability to leverage on its large asset base,
diverse range of products and services, and vast pool of intellectual capital, to
enhance shareholder value.

31

In view of the aforesaid, the Board of Directors of RPL as well as the Board of
Directors of RIL have considered and proposed the amalgamation of the entire
undertaking and business of RPL with RIL in order to benefit the stakeholders of
both companies. Accordingly, the Board of Directors of both the companies have
formulated this Scheme of Amalgamation for the transfer and vesting of the
entire undertaking and business of RPL with and into RIL pursuant to the
provisions of Section 391 to Section 394 and other relevant provisions of the Act.

C.

Parts of the Scheme:

This Scheme of Amalgamation is divided into the following parts:

Part I deals with definitions of the terms used in this Scheme of Amalgamation
and sets out the share capital of the Transferor Company and the Transferee
Company;

Part II deals with the transfer and vesting of the Undertaking (as hereinafter
defined) of the Transferor Company to and in the Transferee Company;

Part III deals with the issue of new equity shares by the Transferee Company to
the equity shareholders of the Transferor Company;

Part IV deals with the accounting treatment for the amalgamation in the books of
the Transferee Company and dividends;

Part V deals with the dissolution of the Transferor Company and the general
terms and conditions applicable to this Scheme of Amalgamation and other
matters consequential and integrally connected thereto.

32

PART I
DEFINITIONS AND SHARE CAPITAL

1. DEFINITIONS
In short it includes
Act

: Companys Act,1956

Appointed Date

: 1st April 2008

BOD

: Board of Directors of both the company

Effective Date

: 2nd March 2009

Government authority

: Applicable central, state or local govt.

High Court

: High court of Gujarat

2. SHARE CAPITAL
Transferor Company:

The authorized, issued, subscribed and paid-up share capital of the Transferor
Company as on 31 December, 2008 was as under:

33

Authorized Share Capital:

RS.

(i) 1000, 00, 00,000 Equity Shares of Rs.10/- each

10000, 00, 00,000

(ii) 500, 00, 00,000 Preference Shares of Rs.10/- each

5000, 00, 00,000

Issued, Subscribed and Paid up Share Capital:

450, 00, 00,000 Equity Shares of

4500, 00, 00,000

Rs. 10/- each fully paid up

Less: calls in arrears

95,250

Total

4499, 99, 04,750

Transferee Company:
The authorized, issued, subscribed and paid-up share capital of the Transferee
Company as on 31 December, 2008 was as under:
Rs.
Authorized Share Capital:
250, 00, 00,000 Equity Shares of Rs. 10/- each

2500, 00, 00,000

50, 00, 00,000 Preference Shares of Rs. 10/- each

500, 00, 00,000

Issued, Subscribed and Paid up Share Capital:

157, 37, 97,633 Equity Shares of

157, 379, 76,330

Rs. 10/- each fully paid up

Less: calls in arrears

25, 59,419

Total

1573, 54, 16,911

34

PART II
TRANSFER AND VESTING OF UNDERTAKING
TRANSFER OF UNDERTAKING
Generally:

Upon the coming into effect of this Scheme and with effect from the Appointed
Date, the Undertaking of the Transferor Company shall, pursuant to the sanction
of this Scheme by the High Courts and pursuant to the provisions of Sections 391
to 394 and other applicable provisions, if any, of the Act, be and stand transferred
to and vested in or be deemed to have been transferred to and vested in the
Transferee Company, as a going concern without any further act, instrument,
deed, matter or thing to be made, done or executed so as to become, as and from
the Appointed Date, the undertaking of the Transferee Company by virtue of and
in the manner provided in this Scheme.
Transfer of Assets:

Without prejudice to the generality of Clause above, upon the coming into effect
of this Scheme and with effect from the Appointed Date:
a) All the assets and properties comprised in the Undertaking of whatsoever
nature and wheresoevers situate, shall, under the provisions of Sections
391 to 394 and all other applicable provisions, if any, of the Act, without any
further act or deed, be and stand transferred to and vested in the
Transferee Company or be deemed to be transferred to and vested in the
Transferee Company as a going concern so as to become, as and from the
Appointed Date, the assets and properties of the Transferee Company.

35

b) Without prejudice to the provisions of Clause (a) Above, in respect of such

of the assets and properties of the Transferor Company as are movable in
nature or incorporeal property or are otherwise capable of transfer by
manual delivery or by endorsement and/or delivery, the same shall be so
transferred by the Transferor Company and shall, upon such transfer,
become the assets and properties of the Transferee Company as an integral
part of the Undertaking, without requiring any separate deed or instrument
or conveyance for the same.
c) In respect of movables other than those dealt with in above including
sundry debts, receivables, bills, credits, loans and advances, if any, whether
recoverable in cash or in kind or for value to be received, bank balances,
investments, earnest money and deposits with any Government, quasi
government, local or other authority or body or with any company or other
person, the same shall on and from the Appointed Date stand transferred to
and vested in the Transferee Company without any notice or other
intimation to the debtors (although the Transferee Company may without
being obliged and if it so deems appropriate at its sole discretion, give
notice in such form as it may deem fit and proper, to each person, debtor,
or deposited, as the case may be, that the said debt, loan, advance, balance
or deposit stands transferred and vested in the Transferee Company).
Transfer of Liabilities:

Upon the coming into effect of this Scheme and with effect from the Appointed
Date all liabilities relating to and comprised in the Undertaking including all
secured and unsecured debts (whether in Indian rupees or foreign currency),
sundry creditors, liabilities (including contingent liabilities), duties and obligations
and undertakings of the Transferor Company of every kind, nature and
description whatsoever and howsoever arising, raised or incurred or utilised for
its business activities and operations (herein referred to as the Liabilities), shall,
pursuant to the sanction of this Scheme by the High Courts and under the
provisions of Sections 391 to 394 and other applicable provisions, if any, of the
Act, without any further act, instrument, deed, matter or thing, be transferred to
and vested in or be deemed to have been transferred to and vested in the
Transferee Company, along with, save and except as provided in Clause
36

PART III
ISSUE OF EQUITY SHARES BY TRANSFEREE COMPANY

Merger is Indias largest ever

RPL shareholders to receive 1 (one) share of RIL for every 16 (sixteen)
shares of RPL
RILs holding in RPL to be cancelled. No fresh treasury stock created
RIL to be a top 10 private sector refining company globally
RIL to become the worlds largest producer of Ultra Clean Fuels at single
location
Merger to unlock greater efficiency from scale and synergies
Merger to be EPS accretive
RIL to have 3.7 million shareholders

MUMBAI, 2 March 2009:

The Boards of Directors of Reliance Industries Limited (RIL) and Reliance

Petroleum Limited (RPL) today unanimously approved RPLs merger with RIL,
subject to necessary approvals. The exchange ratio recommended by both boards
is 1 (one) share of RIL for every 16 (sixteen) shares of RPL. RIL will issue 6.92
crores new shares, thereby increasing its equity capital to Rs 1,643 crores.

Commenting on the merger, Mukesh Ambani, Chairman and Managing Director,

Reliance Industries Ltd said: This merger follows Reliance Industries philosophy
of creating enduring value for all our stakeholders. It is a significant step in our
goal to be among the largest global corporations.

37

GENERAL PROVISIONS

Pending share transfers

In the event of there being any pending share transfers, whether lodged or
outstanding, of any Shareholder of the Transferor Company, the Board of
Directors of the Transferee Company shall be empowered in appropriate cases,
prior to or even subsequent to the Record Date, to effectuate such a transfer as if
such changes in the registered holder were operative as on the Record Date, in
order to remove any difficulties arising to the transferor or transferee of equity
shares in the Transferor Company, after the effectiveness of this Scheme;

The new equity shares to be issued by the Transferee Company pursuant to this
Scheme in respect of any equity shares of the Transferor Company which are held
in abeyance under the provisions of Section 206A of the Act or otherwise shall
pending allotment or settlement of dispute by order of Court or otherwise, be
held in abeyance by the Transferee Company.

Partly paid up shares:

In respect of equity shares of the Transferor Company where calls are in arrears,
without prejudice to any remedies that the Transferor Company or the Transferee
Company as the case may be, shall have in this behalf, the Transferee Company
shall not be bound to issue any shares of the Transferee Company (whether partly
paid or otherwise) nor to confer any entitlement to such holder until such time as
the calls in arrears are paid in full.

38

PART IV
ACCOUNTING TREATMENT AND DIVIDENDS

ACCOUNTING TREATMENT

Upon the coming into effect of this Scheme and with effect from the Appointed
Date, for the purpose of accounting for and dealing with the value of the assets
and liabilities in the books of the Transferee Company, the fair value of the assets
and Liabilities shall be determined as of the Appointed Date.

As considered appropriate for the purpose of reflecting the fair value of assets
and liabilities of the Transferor Company and the Transferee Company in the
books of the Transferee Company on the Appointed Date, suitable effect may be
given including, but not restricted to, application of uniform accounting policies
and methods.

DECLARATION OF DIVIDEND

For the avoidance of doubt it is hereby clarified that nothing in this Scheme shall
prevent the Transferee Company from declaring and paying dividends, whether
interim or final, to its equity shareholders as on the respective record date for the
purpose of dividend.

39

PART V
DISSOLUTION OF TRANSFEROR COMPANY
On the coming into effect of this Scheme, the Transferor Company shall stand
dissolved without winding-up, and the Board of Directors and any committees
thereof of the Transferor Company shall without any further act, instrument or
deed be and stand dissolved.

40

TESTING OF HYPOTHESIS
A hypothesis is a statement about population parameter. Testing is procedure
that helps us to decide whether the hypnotized population parameter value is
accepted or rejected by making use of the information obtained from the sample.
HYPOTHESIS-1
STEP 1 Set Null hypothesis & Alternative Hypothesis
Null hypothesis (Ho): There is no significance difference on the stock price of the
company before and after the merger
Alternative hypothesis (H1): There is significance difference on the stock price of
the company before and after the merger
STEP 2 Determine the appropriate test
The appropriate test statistic is paired t-test.
STEP 3 Set the level of significance
Alpha has been specified as 0.05
STEP 4 Set the decision rule
For the given level of significance 0.05, rules for acceptance or rejection of null
hypothesis are as below:
If tcal > tcritical, reject the null hypothesis, otherwise accept the null hypothesis.

41

 STEP 5 Analyze the data

Date
2-Mar-09
3-Mar-09
4-Mar-09
5-Mar-09
6-Mar-09
9-Mar-09
12-Mar-09
13-Mar-09
16-Mar-09
17-Mar-09
18-Mar-09
19-Mar-09
20-Mar-09
23-Mar-09
24-Mar-09
25-Mar-09
26-Mar-09
27-Mar-09
30-Mar-09
31-Mar-09

Before
price
612.83
598.43
605.55
574.9
584.95
576.68
601
642.13
663.8
650.1
665.7
672.85
669.6
719.23
726.23
766.1
782.75
774.38
758.23
762.38

Date
27-Feb-09
26-Feb-09
25-Feb-09
24-Feb-09
20-Feb-09
19-Feb-09
18-Feb-09
17-Feb-09
16-Feb-09
13-Feb-09
12-Feb-09
11-Feb-09
10-Feb-09
9-Feb-09
6-Feb-09
5-Feb-09
4-Feb-09
3-Feb-09
2-Feb-09
30-Jan-09

42

After price
633.03
645.4
633.28
626.63
626.7
646.88
647.58
633.65
660.1
696.2
675.78
690.63
700.98
694.85
672.43
644.4
653.75
653.1
640
661.8

 STEP 6 Calculate the data

t-Test: Paired Two Sample for Means

Variable 1

Variable 2

Mean

670.391

656.8585

Variance

5172.288052

577.8734029

Observations

20

20

Pearson Correlation

-0.502829222

Hypothesized Mean
Difference

Df

19

t Stat

0.699337867

P(T<=t) one-tail

0.24640719

t Critical one-tail

1.729132792

P(T<=t) two-tail

0.49281438

t Critical two-tail

2.09302405

INTERPRETATION:
From the above chart we can see that we have used t- test, and from the
calculation we can say that t cal > t tab so null hypothesis is rejected. So we can
conclude that there is a significance change into the stock price of the company
because of merger and acquisition. And in whole deal of the company there is no
any specification regarding mal practices or any insider trading. So we can say
that the impacts on share prices are due to merger of both the company.
43

CHARTS

44

45

HYPOTHESIS-2
H0: M&A decision does not impact on company
H1: M&A decision does impact on company
STEP 1 Set Null hypothesis & Alternative Hypothesis

Null hypothesis (Ho): M&A decision does not impact on company

Alternative hypothesis (H1): M&A decision does impact on company
STEP 2 Determine the appropriate test
The appropriate test statistic is paired t-test.

STEP 3 Set the level of significance

Alpha has been specified as 0.05

STEP 4 Set the decision rule

For the given level of significance 0.05, rules for acceptance or rejection of null
hypothesis are as below:
If tcal > tcritical, reject the null hypothesis, otherwise accept the null hypothesis.

46

 STEP 5 Analyze the data

Year

Turnover

PBDIT

Net Profit

EPS (`)

2013-2014
2012-2013
2011-2012
2010-2011
2009-2010
2008-2009
2007-2008
2006-2007
2005-2006
2004-2005
2003-2004
2002-2003

401,302
371,119
339,792
258,651
200,400
146,328
139,269
118,354
89,124
73,164
56,247
50,096

39,813
38,785
39,811
41,178
33,041
25,374
28,935
20,525
14,982
14,261
10,983
9,366

21,984
21,003
20,040
20,286
16,236
15,309
19,458
11,943
9,069
7,572
5,160
4,104

68
64.8
61.2
62
49.7
49.7
105.3
82.2
65.1
54.2
36.8
29.3

EPS (`)
120

105.3

100
80
60
40

68

82.2
64.8 61.2 62

65.1

49.7
49.7

20
0

47

54.2
36.8

29.3

EPS (`)

 STEP 6 Calculate the data

Year
2013-2014
2012-2013
2011-2012
2010-2011
2009-2010
2008-2009

Earnings Per Share

Before
Year
68
64.8
61.2
62
49.7
49.7

2007-2008
2006-2007
2005-2006
2004-2005
2003-2004
2002-2003

Column 1

After
105.3
82.2
65.1
54.2
36.8
29.3

Column 2

Column 1

Column 2

0.930483

INTERPRETATION:

From the above calculation, we can say that correlation coefficient between the
EPS of the Reliance Industry before and after merger is +0.093. This indicates that
m&a are strongly correlated with the EPS of the company. It means that merger
and acquisition decision effects on the EPS of the company. That also we can see
in above chart.

48

RESULTS & FINDINGS

49

RESULTS & FINDINGS

After the merger with RPL, RIL among top 10 private sector refining
companies globally.

RIL will own 2 of the worlds 3 largest, most complex modern refine.

RIL is the worlds largest producer of ultra-clean fuels at a sing location.

After the merger with RPL, RIL will in among 50 most profitable companies
globally.

By applying research methodology we can say that impact of merger on

stock price come gradually because people may not easily react to the
market action. They think before taking position or offsetting the position in
the market. So that we have taken 20 days price of shares.

And also if we think about the growth of the company after the merger
then it will be a time consuming process. Because it takes time to adjust in a
new environment and also in fulfilling the all legal obligations. This impact
we can see in the second hypothesis of research report. In which we can
see the EPS of the company which increases after the merger.

Among five largest producers of Polypropylene.

Having a strong capacity of utilization of management and resources.

50

 Greater efficiency in cash management of the amalgamated entity, and

unfettered access to cash flow generated by the combined business which
can be deployed more efficiently to fund organic and inorganic growth
opportunities, to maximize shareholder value

Benefit of operational synergies to the combined entity in areas such as

crude sourcing, product placement, freight optimization and logistics, which
can be put to the best advantage of the stakeholders

51

SCOPE OF THE STUDY

52

Scope Of The Study

This research is confined for merger of Reliance Industries only.

It can be further research on similar grounds for other industries who have
undertaken merger and acquisition.

53

LIMITATIONS OF THE STUDY

54

LIMITATIONS OF THE STUDY

In this research work researchers have just use secondary data and it is not
sufficient for the research work.
There is absence of practical study in the company or industry.
This research work only limited to merger and acquisition of India.
The entire existence of the companies under research is not studies, making
it limited to the timeframe.

55

CONCLUSION

56

CONCLUSION

To conclude the whole research report we would like to say that.

The merger of RIL and RPL is Indias largest ever merger.

RPL shareholders to get 1 share of RIL for every 16 shares of RPL.

RILs holding in RPL to be cancelled.

No fresh treasury stock created.

RIL to be among top 10 private sector refining company globally.

Merger to unlock greater efficiency from scale and synergies.

Merger to be EPS accretive; AAA rating reaffirmed by CRISIL.

57

REFERENCES

58

REFERENCES

http://abd.teikav.edu.gr/articles_th/mergers.pdf

http://ijiet.com/wp-content/uploads/2012/08/1.pdf

http://mpra.ub.uni-muenchen.de/19274/

http://umu.diva-portal.org/smash/get/diva2:141248/FULLTEXT01.pdf

http://library.imtdubai.ac.ae/Faculty%20Publication/Dr.rajesh/Mergers,%20Acquis
itions%20and.pdf

https://helda.helsinki.fi/bitstream/handle/10227/289/186-978-952-232-0063.pdf?sequence=1

http://www.ril.com/rportal/jsp/eportal/ListDownloadLibrary.jsp

http://www.ril.com/html/aboutus/aboutus.html

http://mpra.ub.uni-muenchen.de/32685/1/MPRA_paper_32685.pdf

59