Financial Insights Navin Kumar 6010091005085 RELIANCE PETROLEUMS TRIPLE OPTION CONVERTIBLE BUNDS ISSUE 5 (a) Reliance Petroleum

Ltd issued a Triple Option Convertible Debentures to raise capital from the public because they felt that these types of financial instruments would give benefit to the company as well as investors. They provided an option to investors to opt for equity shares at the time of TOCD conversion in Sep. 1997 in case the listed price of RPL stocks was higher. The issue created an investor base exceeding two million, the 2nd largest in the Indian corporate sector next only to Reliance Industries Limited. So the company benefited a lot from it. These types of convertible securities that reduced the investors risk and provide them with the option of converting debentures into tradable securities also contributed to its success. TOCD also provided lots of benefit to the investors:The TOCDs were made more attractive by offering payment in installments to the customer. It was issued for a face value of Rs. 60 but it allowed to pay this in next 3 yrs. These two equity shares were allotted as soon as the first installment of Rs 20 was paid. The remaining amount of Rs. 40 comprised a non-convertible portion accompanied by two detachable warrants, each of which could be converted into an equity share paying Rs. 20 per share i.e. at a premium of Rs. 10. See the below table:RPLs TOCD Issue Payment Schedule Payment Schedule Zero Date- (taken as issue opening date) After 18 months After 30 Months After 36 Months Amount Rs.20 Rs.10 Rs.15 Rs.15

This allowed the investors to invest in easy installment and also an option that they can convert into equity and company also got secure for fund for next 3 yrs. The holders of the TOCD would not be paid any interest for the first 5 yrs of the issue but were provided with three options. The investors were required to exercise their option in sep 1997 when the RPL share was trading at around Rs.22. They were also required to make a choice between converting the non convertible portion and the detachable warrants into equity shared and redeeming the instrument. So, this type of convertible securities gives benefit for both the parties.

(b) Reliance Petroleums gave 3 options to investor through Triple Option Convertible Debentures. First option it gave to investor can retain the non-convertible portion of Rs. 40 per debenture and get it redeemed in the 6th, 7th and 8th yrs. Second option it gave to investor can surrender the non-convertible portion of Rs. 40 per debenture with the warrants to the company between the 47th and 49th month from the zero date. Third option it gave to investor can exercise the warrants between the 47th and 49th month from the zero date by making a payment of Rs.40 for 2 equity shares and retain the NonConvertible portion of Rs. 40 which will be redeemed in the 6th, 7th and 8th years. According to plan, since interest couldnt be paid so YTM=22-15 =7 principal amount would be participate further.