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Anil Ambani increases Stake in Reliance Infrastructure

April 1, 2010

Anil Ambani invested Rs18.2B in Reliance Infrastructure with the conversion of 19.6MM warrants into an equal no. of shares at a
conversion price of Rs929 (10% discount to CMP). The promoter has an additional 23.3MM warrants eligible for conversion at Rs929/share before Nov-10. The move is a reflection of promoter confidence in future growth opportunities in RELI. Conversion of the remaining warrants before Nov-10 could potentially increase promoter stake to 47.7%.

A previous warrant issue in Jan-08 (43MM warrants, conversion price of Rs1,183) was cancelled by the promoter due to weak
stock price
and the promoter had to forgo upfront payment of Rs7.83B made at that time. Factoring equity forgone (Rs182/share), the effective conversion price for the promoter works out to ~Rs1,111/share (Rs929+Rs182), or option to convert is out-of-money by ~9% relative to CMP.

The EPS dilution post allotment is ~8%, however overall an equity infusion by promoter is a positive move, in our view.

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