The much anticipated and talked about merger is all set to happen. The Reliance Industries board will consider the merger of IPCL with itself on March 10. While the IPCL merger will give a big boost to the RIL balance sheet, all eyes are now fixed on the swap ratio for the merger.

R Amarnath, Head-Corporate Finance of Centrum Capital believes that the petchem cycle is expected to remain stable over the next couple of years. According to him, the merger ratio will be around 4-5 shares of IPCL for every 1 share of RIL. In his view, the merger will be positive for IPCL shareholders. He further adds that RIL will get IPCL's cashflows and tax incentives from merger.

Excerpts from CNBC-TV18's exclusive interview with R Amarnath:

A: First,let me make a disclosure - I have been a fairly long-term holder of both IPCL and Reliance,so let me set the stage first with that.

Their numbers are floating around in the market, but you would want me to put a number to it, I guess the merger ratio would be somewhere between four-five shares of IPCL getting you one share of Reliance.

So that’s where I would ballpark, put it somewhere in that range and it’s a win-win equation for shareholders of both the companies, possibly slightly more win for the IPCL shareholders who have waited for a reasonable number of years now to sort of get integrated into the Reliance family. They are already part of it after the acquisition but now they move in and become a part of Reliance itself and all the growth opportunity that Reliance is unfolding.

A: I think from a business perspective, I would see it from IPCL’s perspective, clearly the way we are integrating with the globe in terms of commodity, duties having come down to ASEAN levels. The input prices for IPCL for e.g. gas which is also getting to move slowly towards market-linked things, so that would mean that IPCL also needs to be part of an integrated value chain which is what the merger with Reliance completes.

If you recall last October a lot of the smaller companies in the Reliance group which were in the polyester and fiber space have got merged into IPCL so that was possibly the last bit to fall in place and now we are seeing the final stage into that.

From the IPCL shareholders perspective, they would love to be part of Reliance Industries humongous value added chain, from under sea to page 3, if I use that phrase, that we see them delivering and from Reliance’s perspective, what it brings them is some kind of synergies in terms of taxation those kinds of issues I guess.

And the second aspect would possibly be the ability to utilize IPCL’s cash flows integrated with the investment agenda and IPCL has cash flows of about USD 400-500 million a year so that can be used directly for Reliance’s growth strategies.

A: I think yesterday, it was about 5.2:1, but over a period of time, I think last October when the merger of the other entities happened and the ratios started diverging, otherwise it was pretty much running around 4:1 and over the past five months, so to say its diverged with the ratios cueing against IPCL over the past few months.

But I guess it will all have to be based on valuation of each of the businesses going forward and based on the past track record. One must keep in mind that IPCL is possibly one of the cheapest petrochemical plays in terms of global valuation corp. so the market may value something differently but the fair value would be slightly different. So I guess four-five would be the broad range,I would put it in as the possible ratio.

A: The fact is that the non-integrated players are relatively more vulnerable in the kind of commodity scenario particularly in the polymer and polyester chain that we are seeing at this point of time. But petrochemical cycle, overall is expected not to face too many hiccups or too greater volatility over the next couple of years in terms of capacity utilization or operating rates. So integration with Reliance is clearly the way forward in terms of adjusting all the issues, which could have potentially been a threat to IPCL if it remained a standalone operation.

A: I would expect, it to be range bound and volatile. I think there are several more volatility-inducing factors which are yet to play out. I think some of the governmental interferences in terms of the corporate profitability and free market issues are something, which kept the markets on tenterhook.

We also have politics possibly in April-May possibly giving another bit of uncertainty to the market or jitters to some extent and you are going to see corporate results this time because it’s going to be full year results; you will see most of them coming possibly in the second half of May most of the big ones at least.