The rights issue -- in the ratio of two equity shares for every one equity share held -- is at a premium of Rs 190 on a Rs 10 paid-up equity share. The issue will open on December 20 and close on January 5, 2005.

Reliance Enterprises is not listed on the bourses nor "does it intend to be listed," it said in its offer document mailed to its shareholders.  At today's market price on the Bombay Stock Exchange, Reliance Enterprises' holding is valued at around Rs 1,700 crore (Rs 17 billion).

In its annual report for 2003-04, Reliance Industries has listed Reliance Enterprises among the 17 entities, which are associate companies and joint ventures.

The Reliance Enterprises' offer document lists four directors on the board as Vinod M Ambani, S Seth, Atul Dayal and K Sethuraman. The company has pointed out to its shareholders that there is "no specific business proposal" to the objects of the rights issue.

The Reliance 'ownership issue'

It is raising the money to redeem Rs 86 crore (Rs 860 million) worth of six per cent cumulative redeemable preference shares of Rs 100 each, and partly pre-pay existing borrowers.

Reliance Enterprises derives most of its income from dividends received from Reliance Industries.  Reliance Enterprises has pointed out to its shareholders that "the company does not propose to sell its investments in RIL".

The company's income has moved upwards from Rs 12.67 crore (Rs 126. 7 million) in 2000-01 to Rs 16.45 crore (Rs 164. 5 million) in 2003-04. 

The company's net profit after tax rose from Rs 48 lakh in 2000-01 to Rs 1.08 crore (Rs 10.8 million) in 2003-04.

The company's earnings per share which was a negative Rs 1.05 in 2000-01 has improved dramatically to Rs 19.12  in 2003-04. Reliance Enterprises has not paid any dividend to its shareholders.

It now intends to pay the arrears of the dividend on preference shares accumulated up to the date of redemption as and when "sufficient distributable profits and adequate liquid funds are available. The arrears of dividend of preference shares will, even after the redemption of preference shares, continue to have preference over equity dividend."

Reliance Enterprises has also called an extraordinary general meeting on December 20 to obtain shareholders' permission to cancel unissued preference shares of various series attracting different rates of interest.

The diminished authorised share capital will be increased by issue of equity shares and six per cent cumulative redeemable preference shares of Rs 100 each.