On May 19, 2000, Reliance Industries Ltd. (RIL), together with its wholly owned subsidiary, Reliance Power Ventures, informed SEBI, the stock exchanges and the company, of its intention to make an open offer for further acquisition of equity shares of BSES Ltd. Reliance is the single largest private sector shareholder in BSES, with aggregate shareholding of 14.82% of subscribed and fully paid up equity share capital. The open offer is being made, in a fair and transparent manner, in accordance with SEBI's (Substantial Acquisition of Shares & Takeovers) Regulations, 1997, to enable Reliance to increase its shareholding beyond 15%. The open offer was made for 20% of the subscribed and fully paid up equity share capital of BSES, i.e. 2,75,45,133 equity shares, at a price of Rs. 234 per share, aggregating approximately Rs. 650 crores (approximately US$ 150 million). The offer price represents the minimum 26-week average price specified under SEBI Regulations. The offer is likely to open in June 2000, and will remain open for a period of 30 days, as per current SEBI guidelines.

BSES - Background
BSES is one of the leading power companies in India, and is engaged in the generation, transmission and distribution of electricity. BSES is ranked among India's top 20 companies in terms of net profits, and among the top 30-35 top companies, on all other financial parameters. Some of the salient features of BSES are as follows :

• The company's existing power generation capacity is 500 MW, and the additional capacity planned is over 1,000 MW.
• BSES is the largest power distribution company in India, and holds the exclusive license for distribution of power in Mumbai, and also for more than 75% of the state of Orissa. BSES and its subsidiaries provide electricity service to more than 2.7 million consumers, in areas covering 1,23,000 square kms, and with an estimated population of 34 million.
• The company provides services in electrical contracting, engineering, procurement and construction contracts and computer services, and has recently commenced operations as an Internet Service Provider (ISP) in Mumbai.

Reliance in the Power Sector
The country's total installed power generation capacity is presently 90,000 MW. The demand supply deficit in the future is estimated at over 100,000 MW. Reliance is pursuing attractive opportunities in this sector, with the objective of achieving aggregate capacity of over 10,000 MW in the next 10 years. The power sector initiatives represent a strategic fit in RIL's objectives of capturing value across the entire energy chain, as Reliance is pursuing projects with meaningful feedstock linkages. Reliance already has significant power experience in captive power generation, with substantial in-house skills for planning and executing large projects. Captive power generation facilities at its plants at Naroda, Patalganga, Hazira and Jamnagar aggregate over 800 MW.

Reliance's various power projects under development have a total capacity of over 6,000 MW. This, together with BSES, existing and future projects of nearly 2,000 MW, aggregates to capacity of 8,000 MW, making Reliance the largest private sector player in the power sector in India.

Substantial Benefits to Reliance and BSES
Reliance's proposed substantial acquisition of shares in BSES is expected to yield the following benefits to both companies:

• Shared pursuit of the common vision of building adequate power infrastructure in India, and making available uninterrupted quality power to consumers in a cost-efficient manner
• Creation of new assets in the power sector, to an international scale and magnitude, with enhanced overall competitiveness
• Pooling of engineering, construction and other project management strengths, leading to fast track implementation of power sector projects, at the lowest capital costs, and with the shortest gestation periods
• Access to state-of-the-art technologies for achieving optimal operational efficiencies, and the highest levels of productivity
• Enhanced levels of fuel linkages, contributing to stability of power supply
• Multi-functional synergies, leading to significant cost reduction
• Enhanced financial flexibility, and the ability to access larger pools of domestic and international capital, at competitive costs
• Entry into the power trading and derivative markets, leveraging on Reliance's demonstrated financial engineering capabilities and strengths
• Extended geographical reach, for offering services to a wider base of customers
• Strategic balancing of business portfolio, and diversification of risk

Reliance and BSES will also derive substantial value and benefits from the potential for providing convergent broadband applications, in areas such as Mumbai, Orissa, etc. Reliance's overall endeavor will be to accelerate BSES's growth plans, for implementing its vision, and achieving leadership in the power sector.

The BSES counter on the Bombay Stock Exchange was in the limelight having shot up by the maximum permissible limit of 12 per cent to Rs 282.20 amidst large volumes on the two major exchanges. Heavy purchases in the counter were attributed to expectations that Reliance will shortly revise upwards its open offer price from Rs 234 a share. The company's announcement that it had not planned any change in the offer price did not pacify punters who continued to make purchases. At the upper end of the circuit there were sizeable unexecuted buy orders in the counter. There were also rumors that Enron might make a counter offer for the acquisition of a controlling stake in BSES. There are also rumors that BSES which had plans to go for an $25 million ADR issue is contemplating a convertible bond issue with a coupon rate of 4-5 percent in the US 144A debt market to avoid the takeover by Reliance. But for the now the markets are bullish on this deal.