Rallying solidly behind Chairman Mukesh Ambani, the board of directors of Reliance Industries Ltd on Monday reposed full faith in him in the midst of his battle with younger brother Anil, saying the 'present organically integrate structure of the company should not be changed.'

The meeting was attended by all RIL directors, including M L Bhakta who had earlier resigned from the board.

The RIL board resolved that the present organically integrated structure of the company envisioned and created by the founder chairman Dhirubhai Ambani should not be altered in any manner, said an RIL media release.

• The Reliance ownership issue: Complete Coverage

The board felt that this will be in the larger interests of providing, on a sustained basis, financial resources, growth opportunities and stability, extending handsome benefits to its very large family of shareholders and significant contribution to the national economy, said the release.

Reliance Industries has grown into an integrated organic entity having intrinsic synergy and the RIL board emphasised that the company's strengths and prospects could be maintained and enhanced by RIL continuing in its present form without any dismemberment.

'This would be in the larger interests of the shareholders, employees and other stakeholders,' said the RIL media statement.

Anil Ambani's 'tireless efforts' applauded

The media statement said that the RIL 'board also recorded its deep appreciation of the devoted tireless efforts of the entire management team, including the vice chairman & managing director Anil Ambani, executive directors, executives and employees under the overall leadership of the chairman and managing director Mukesh Ambani.'

Corporate governance

The company has decided to set up a standing committee of independent directors to oversee various matters concerning corporate governance.

The board also considered various matters relating to infocomm initiatives of RIL, including investments in Reliance Communications and Infrastructure Limited and Reliance Infocomm Limited and noted that investments were made in RCIL and RIC, for value creation for RIL shareholders.

The board reconfirmed the investments, saying that amidst baseless and misleading reports, RIC had successfully executed a loan agreement with US Exim Bank and Export Development, Canada for an aggregate term loan of $750 million on attractive terms.

This, said the Reliance board, points to a very high level of international confidence in RIC and RCIL.

RIL has invested in Deep Discount Bonds and all dues of RCIL and RIC to RIL have been fully paid. The board said that the yield from the Preference Shares (Rs.8,100 crore) of RIC at 8 per cent per annum, which is tax free, is higher than RIL's cost of loan funds. In order to arrive at a fair price and determine the right timing for conversion, the board decided to constitute a committee of directors of six independent directors, who may engage the services of valuer(s) of international repute.

Responding to the request of RCIL and RIC, the board decided to nominate two independent directors of RIL to the boards of RCIL and RIC as a measure of good corporate governance. The board said that since allotment, RIL's shareholding in RCIL remains unchanged.

Sweat equity: No infringement of law

The board noted that there was no infringement of any laws or regulations in the matter of RCIL giving Mukesh Ambani an option to acquire 50 crore (500 million) shares in RIC, and his exercise of the option.

The grant of option and its exercise by Mukesh Ambani have been annulled by RCIL at Mukesh Ambani's request.  Consequently, RCIL's shareholding in RIC has reverted to its former pre-option level.

Reasonable assistance for REL okayed

The board considered certain matters raised by Reliance Energy Ltd., (REL), a subsidiary of RIL group. It was noted that RIL's reply to REL's letter dated December 4, 2004 has already been sent, and that reply to REL's subsequent letter dated December 23 2004, would be sent in accordance with decisions taken on Monday, the RIL statement said.

The board decided that reasonable assistance would be extended to REL in several respects, as desired by REL, without affecting RIL's operations and projects.

It was also decided that it would be prudent to require that large projects of all RIL group companies be considered by RIL for approval if necessary.

The board reaffirmed that gas would be supplied for the Dhirubhai Ambani Energy City power project. An appropriate official joint group would be set up to work out the details on operational and commercial aspects.

The status of KG basin gas production and transportation was briefly reviewed. It was noted that some required approvals (Government, regulatory and others) are yet to be received.

For supply of KG basin gas to DAEC, additional pipeline linkages would need to be configured, involving the government, GAIL and others. As soon as it becomes feasible to do so, RIL would be in a position to supply gas to DAEC on the usual terms and conditions, the statement said.

The RIL statement said that the integrated character of RIL was a legacy of its founder chairman Dhirubhai Ambani and that maintaining this character is of paramount importance in the discharge of its responsibility to shareholders of RIL.

The committee will oversee/interface with stakeholders, such as investors, media and institutions, and matters concerning:

• Review of observance of corporate governance practices at all levels and suggest remedial measures, wherever necessary.
• Provision of correct inputs to the media so as to preserve and protect the company's image and standing.
• Dissemination of factually correct information to investors, institutions and the public at large.
• Interaction with the existing and prospective FIIs and rating agencies.
• Handling important communications on behalf of the company with assistance of consultants/advisors, if necessary.
• Institution of standardized channels of internal communications across the company to facilitate a high level of disciplined participation.

RIL board reaffirms Infocomm investments

The RIL board reaffirmed several aspects:

1. Committing to be the lead investor in the infocomm initiative with 45% stake, consistent with the wishes of Mr. Dhirubhai Ambani, Founder Chairman of RIL.

2. Implementing the infocomm initiative in two separate companies, viz. Reliance Communications Infrastructure Limited (RCIL) -- for infrastructure and data business; and Reliance Infocomm Limited (RIC) -- for voice business.

3. Investing in the infocomm initiative by RIL, aggregating Rs 12,062.50 crore, comprised the following:

• 45% of equity capital in RCIL (Rs 2,331 crore)
• 7.57% of equity capital in RIC (Rs 31.50 crore)
• Deep Discount Bonds of RCIL redeemable in September 2011, with a put and call option every year on September 1, from 2006 onwards (Rs 1,600 crore)
• Cumulative convertible/redeemable Preference Shares in RIC (Rs 8,100 crore)

4. RCIL holding 77.29 per cent of RIC's equity capital, thereby RIL's effective holding in RIC being 42.35 per cent.

5. Endorsing the changes in the names of RCIL/RIC from the year 2000 onwards necessitated by business exigencies.

6. Noting the annulment of the exercise of the option by Mukesh Ambani with respect to Rs 50 crore share of RIC.

7. Noting and placing on record the position of receivables of Rs 3,426 crore of Smart Entrepreneurs Solution Pvt. Ltd., investment of Smart in ONGC and other IPOs from its own resources, RCIL having 100 per cent effective ownership of Smart and Smart having already received Rs 2,079 crore of its total receivables with the balance due over the next 20 months.

8. Raising of rupee term loans of Rs 4,725 crore and foreign currency loan of $344 million by RIC at rates lower than the yield on preference shares issued to RIL and without any guarantee from RIL.

9. Signing of a loan agreement by RIC with US EXIM Bank and Export Development, Canada for an aggregate amount of USD 750 million without any guarantee or comfort letter from RIL and its Sovereign pricing.

10. Recognizing the above loans as a demonstration of the faith and confidence of international lenders in RIC's project, disregarding the campaign in the media about RIC, its ownership and allegations of financial irregularity.

New directors on RIC board

The board resolved to constitute a committee comprising of the present six independent directors of RIL to consider all matters pertaining to exercise of the company's option to convert 162 crore cumulative convertible/redeemable preference shares of the aggregate value of Rs 8,100 crore (Rs 81 billion).

The committee will also consider appointing one or more valuers of international repute to determine the fair value of the equity shares of Reliance Infocomm Limited.

The board also decided to nominate, Y P Trivedi and M P Modi, representing RIL, as independent directors on the respective boards of RCIL and RIC.  These nominations were made based on an invitation by RCIL.

All the resolutions before the RIL board were passed by all the members of the board, except Anil Ambani, who opposed/abstained in some cases.