Reliance Industries merger with Indian Petrochemicals Corporation has come into effect from September 5. On Wednesday, the certified copies of the Gujarat and Bombay High Courts’ orders sanctioning the scheme of amalgamation were filed with the Registrar of Companies.

As per the merger terms, IPCL shareholders will get one RIL share for every five shares in the company. This has led investors to buy IPCL shares to benefit from the arbitrage window.

Brokers feel that investors can strike a gain of 2-3% in the short-term by using the arbitrage window effectively.

There is a huge difference in the market prices of RIL and IPCL. The RIL scrip ended Thursday up 1.5% at Rs 1,987 while IPCL closed up 0.6% at Rs 388. If you work out the maths, the total cost of five IPCL shares is less than the cost of one RIL share. The cost of five IPCL shares, as per yesterday’s closing price on the BSE, works out to 1,940, while is Rs 47 less than the closing price of RIL. In nutshell, it means that post-merger, IPCL shareholders will get RIL at a price cheaper than the market rate.

According to sources, RIL shareholders are cashing out and buying IPCL shares instead. Investors having no exposure to RIL are also taking this route, they added.

However, this scenario works best for investors if RIL trades above yesterday’s closing levels. In case it falls below those levels, the arbitrage window will narrow. Investors must also take into account brokerage, securities transaction tax, stamp duty and service tax.

To circumvent this problem, investors could trade in the derivatives segment by buying one lot of IPCL futures and selling RIL futures.

But this window may also narrow as any many funds, sources say, have already started availing of this opportunity.

In the past two trading sessions, around 7-9 lakh IPCL shares have changed hands daily, which is much higher than the two-week average of 3.10 lakh shares.