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Monday, 4 March, 2002, 15:59 GMT
Merger to create Indian energy giant
Reliance Petroleum is India's largest private oil refiner
India's Reliance Group is to merge its two biggest firms to create the country's first fully-integrated energy company.

The new company will be valued at over $10bn, making it the second largest company in India - only Hindustan Lever will be more valuable.

It will also qualify for the Fortune 500 list of the world's biggest companies.

Reliance Industries and Reliance Petroleum will merge to create a company that analysts say will account for nearly 3% of India's gross domestic product.

Reliance Petroleum is India's largest private sector oil refiner while Reliance Industries is the country's biggest petrochemicals firm.

Under the merger terms, shareholders will get one share in Reliance Industries for every 11 shares they hold in Reliance Petroleum.

Reliance's founding family, the Ambani family, will own 34% of the new combined company.

Reforms bring opportunities

Anil Ambani, managing director of Reliance Industries, told the BBC's World Business Report that the on-going economic reform of India's energy sector was the driving force behind the merger.

The Indian government is in the process of deregulating the energy sector.

In April, it will scrap a state-administered pricing mechanism for oil products.

The government is also likely to privatise India's two state-run oil companies later this year - Hindustan Petroleum Corporation and Bharat Petroleum Corporation - and Reliance is seen as a major contender for stakes in them.

Widespread interests

As well as its presence in the energy sector, the group has interests in financial services, through Reliance Capital, which it hopes to expand, according to Mr Ambani.

The group is also involved in the telecommunications and information technology sectors through Reliance Infocom - a $5bn investment in a fibre optic network, with plans to link 115 cities.

"It will be these three areas which really will be the focus of growth for the future," said Mr Ambani.

Anil Ambani, managing director Reliance Industries
"The primary driving force for this merger has been at one level the ongoing economic reforms"
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