‘Am­bani’s Reliance re­vamp may help con­tain mas­sive li­a­bil­i­ties’

New Straits Times - - Business World -

In­dia’s rich­est man is look­ing at ways of in­su­lat­ing his fam­ily’s hold­ings in Reliance In­dus­tries Ltd from the gov­ern­ment’s ef­forts to tax some longterm cap­i­tal gains, say sources.

Mukesh Am­bani’s plan to re­vamp his stake in the na­tion’s se­cond most-valu­able com­pany, by trans­fer­ring shares be­tween en­ti­ties af­fil­i­ated with his fam­ily, was aimed at re­duc­ing their po­ten­tial bill fol­low­ing changes in In­dian levies, said the peo­ple.

The move might help con­tain li­a­bil­i­ties from the sales at about US$45 mil­lion (RM200.25 mil­lion) com­pared with nearly US$4.5 bil­lion if they were to do a sim­i­lar deal af­ter April 1 once the tax changes took ef­fect, ac­cord­ing to Bloomberg cal­cu­la­tions.

Am­bani owns 46.5 per cent of Reliance via at least 55 en­ti­ties re­lated to him or mem­bers of his fam­ily.

The re­vamp will con­tain the fam­ily’s tax li­a­bil­i­ties should the founders sell stake at a later date.

In­dia will levy a 20 per cent tax on the sale of cer­tain shares held by in­di­vid­u­als or limited li­a­bil­ity part­ner­ships from next month.

A num­ber of com­pa­nies were weigh­ing sim­i­lar trans­ac­tions to pro­tect against fu­ture obli­ga­tions, said Amit Ma­hesh­wari, a part­ner at ac­count­ing firm Ashok Ma­hesh­wary & As­so­ci­ates.

“Any pru­dent com­pany would like to hedge its po­ten­tial risks,” said Amit.

“This is merely a pre-emp­tive mea­sure to avoid tax li­a­bil­i­ties,” on any trans­ac­tion from April 1, he said.

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