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