How Reliance Industries moves before, on and one-week after AGM

 
Sagar Salvi, Riken Mehta
moneycontrol.com

The Reliance Industries ' Annual General Meeting (AGM) has always been a big event for the company's shareholders, prospective investors and traders.

However, chairman Mukesh Ambani's plans to invest Rs 150,000 crore over the next 3 years failed to cheer the Reliance Industries stock as it ended the session on Thursday a percent down.

Reliance, India's fourth biggest company by market value, has been under pressure from investors over its slowing gas business and its drive into consumer-focused sectors such as telecoms and retail.

Remaining tightlipped, Ambani gave away few details of his plans for the long-anticipated launch of 4G telecommunications services, which was a big disappointment for the street.

Below is a historical chart of how RIL stock has moved before, on and one-week after AGM in the last five years.

How brokerages view Reliance Industries-BP oil find

Riken Mehta
Moneycontrol Bureau

Reliance Industries  (RIL) on Friday announced a huge natural gas discovery, possibly the biggest find ever, in the flagging eastern offshore KG-D6 block that will be crucial in arresting its falling gas output. The company has not disclosed estimates but media reports have suggested that reserves may be more than pre-drill best estimate of 1.2 trillion cubic feet equivalent.

Brokerage house Goldman Sachs has reiterated its 'Buy' rating on Reliance Industries with 12-month sum of the parts based target price of Rs 1,070 citing RIL’s capex in core segments that will lift its cash returns over the medium term.

"The announced discovery looks significant given that the largest D6 discovery had a gross hydrocarbon column of 194 mts (MA-2 well). Moreover, if this discovery leads to a new commercial reservoir, it could meaningfully add to D6 reserves, in our view. Overall, we believe, this discovery further strengthens our view that RIL’s E&P business is turning around," said the Goldman Sachs note to clients.

Brokerage house Barclays has retained its 'equalweight'rating on Reliance Industries with a target price of Rs 870 pending more clarity on MJ-1’s key parameters.

"We hypothesize that MJ-1 could be worth USD 2.5 billion (USD 8.1/boe) based on 1.5tcf and 60million barrels, USD 1.9 billion capex (USD 6/boe), a FY17 start-up and assuming that it is not ring-fenced. This translates to Rs 28 per share for Reliance’s 60% share. Niko (10% share) was up 23% on Friday adding USD 100m in market-cap or Rs 11 per share for Reliance’s 60 percent share," said the Barclays note to clients.

CLSA too has retained its 'outperform' rating on the stock citing final decision on doubling of gas price as the next key trigger in FY14.

"Reliance’s first exploration well after a near two year exploration hiatus has been announced as a “significant” gas and condensate discovery. Based on our estimated value of USD 4/boe for development upside from a gas and liquid discovery, this could a value of USD 650 million for ever 1TCF i.e. Rs 8 per share for Reliance’s 60 percent stake. We note that Niko added USD 92mn to its market cap on the back of this discovery given its 10 percent stake. Pertinently, sharp movement in Niko’s stock implies a possible addition of Rs 12 per share for Reliance," said the CLSA note.

How Reliance GRM fares against Singapore GRM

Riken Mehta & Shaheen Mansuri
Moneycontrol.com

Ahead of Reliance Industries Ltd’s Q2 earnings announcement today, analysts have highlighted that improved gross refining margins (GRMs)— the difference between the cost of processing crude and the revenue from selling finished petroleum products—will partially offset weaker petchem margins and dwindling gas output from the energy giant’s KG-D6 fields.

According to a consensus of at least five brokerages, RIL’s GRMs, a key source of income for its core biz is expected to be anything between USD 9-9.5/bbl in comparison to Singapore  refinery which is estimated to average at USD 9.13/bbl during the quarter.

Due to the complex nature of its Jamnagar refinery, RIL’s  refining margins are benchmarked with the Singapore refinery which is also a testimony for other Asian refiners.

RIL has always highlighted the premium to the Singapore benchmark, but of late the premium has shrunk due to inventory losses.

Though, RIL’s GRMs in the sequential quarters have enhanced on improvement in LPG and naphtha spreads, business environment for refining companies continues to be tough the world over; blame weakness in demand and capacity additions globally.

Unit: $/bbl 

Nifty ends lower; RIL hits 5-month high on Goldman report

A dull close for the Nifty after market resumed trade following the national holiday. The excitement was only seen in the broader markets, where renowned midcap IT and NBFC companies made smart gains for traders.

Goldman Sachs says Reliance Industries can potentially become a USD 100 billion stock by fiscal 2017 from its current market capitalisation of around USD 46.6 billion. The stock closed at 5-month high and above psychological mark of 800.

Rate cut? Not yet

The Reserve Bank today said it will assess if the declining trend in inflation is sustainable and accordingly take decision on reducing interest rate.

RBI Deputy Governor K C Chakrabarty said 5% inflation is India's comfort zone. The Reserve Bank is scheduled to review its monetary policy on September 17. Bank Nifty sheds 1% in trade today.

The Sensex closed at 17657.21, down 70.99 points or 0.40% at 17657.21 and the Nifty ended at 5362.95 down 17.40 points or 0.32%. The breadth of the market was negative. About 1261 shares advanced, 1505 shares declined, and 678 shares remain unchanged.

Top news of the day

ITC lost over 3% on fears about regulatory action at home after Australia called on the world to match its tough new anti-tobacco marketing laws that will ban logos on cigarette packs.

Maruti Suzuki will lift the lock out at its Manesar plant on August 21,  R C Bhargava, the chairman of India's largest passenger car maker said on Thursday. Maruti had shut the Manesar plant last month, following a workers unrest that left a general manager dead and 96 supervisors and managers injured.

Shares in India's software exporters Infosys and Tata Consultancy Services fall after MSCI's decision to lower their weighting in the MSCI India index.

MSCI also increased the weightage of HDFC's in its MSCI India Index by 120 basis points to 7.4%. The changes of MSCI index review would be effective after close of market hours on August 31.

Coal India (CIL) has agreed to certain changes in the fuel supply pact to be entered with state-nominated agencies. The development comes ahead of company board meeting early next month to approve model fuel supply agreement (FSA) which the coal major would sign with power companies.

Jet fuel or ATF price was today hiked by over 3.2%, the third straight increase since July, adding to the cost burden of cash-strapped airlines.

The price of aviation turbine fuel (ATF), or jet fuel, in Delhi was hiked by Rs 2,130.17 per kilolitre (kl), or 3.27%, to Rs 67,135.76 per kl, according to Indian Oil Corp, the nation's largest oil firm. The rate hike comes on back of a steep 4.5% increase in rates effected from August 1 and has wiped off all of the reduction in prices done in May and June.

TCS to buy Computational Research Laboratories (CRL), a start-up group company, for Rs 188 crore. The move would boost its cloud computing services.

European markets weak

European stocks and the euro were lower on Thursday after global growth engine China warned its trade outlook was worsening and stronger US data tempered expectations of additional stimulus from the Federal Reserve.

Gold demand at 2-year low

Gold demand fell to its lowest level in more than two years in the second quarter, the World Gold Council said on Thursday, as a drop in buying in major consumers India and China outweighed a record quarter for central bank purchases.

Overall gold consumption fell 7% or nearly 76 tonnes to 990 tonnes in the three months to June, its lowest quarterly level since the first three months of 2010, the WGC said in its quarterly Gold Demand Trends report.

Chart of the day: Is RIL's buyback programme a hit so far?

Riken Mehta
Moneycontrol Bureau

Reliance shares continue to flounder even as the company is buying back shares from the market. When the company had announced the share buyback, investors were hopeful that it would act as a good support at lower levels. However, with uncertainty over gas output persisting, investors appear to be using every rise in stock price to book profits. RIL has so far bought back 3.18 crore shares since 14th February, 2012. It touched a 52-week low of Rs 671 on 8th May.

Chart of the day: It's not just RIL that is suffering from low gas output

Riken Mehta
Moneycontrol.com


Falling output at Reliance 's KGD6 is causing grief to power companies as well, as it comes at a time when there is a shortage of coal as well. Over the last three years, the movement in the benchmark BSE Power index has shadowed that of the RIL stock. And there could be more bad news in store. Niko Resources, RIL's partner in the KG basin on Thursday slashed proven and probable gas reserve estimate by 78.5% to 1.93 trillion cubic feet from around 9 tcf earlier.


See the chart below. RIL's average KGD6 Gas output in each quarter from Q1FY10 to Q4FY12. Chart: BSE Power Index, RIL share price vis-a-vis KGD6 Gas output