Compromise may hold key to Ambanis' gas dispute: Analysts

NEW DELHI: The solution to the protracted gas supply dispute between the two Ambani brothers that has reached the Supreme Court may come through a compromise, some analysts said, fearing that the row could well impact the stock prices of group companies of both.

"The issue (gas dispute) is vexed, therefore, and may eventually require a compromise. Pricing holds the key ...," global research firm CLSA said in a research note.

Anil Ambani group firm RNRL and Mukesh Ambani-led RIL have filed cross-petitions in the Supreme Court challenging the Bombay High Court order and the matter will come up for hearing tomorrow.

While RNRL wants immediate implementation of the order to get the gas at USD 2.3 per mmBtu, a price 44 per cent lower than the one fixed by the government, RIL says it cannot supply the industry fuel without the consent of the government.

Incidentally, the global spot price of the gas is hovering at around USD 3 per mmBtu though the long-term contract price is ruling higher.

The shares of Reliance Industries have gained over 10 per cent this week to settle at Rs 1,933 on the Bombay Stock Exchange on Friday, while the Anil Ambani group firm Reliance Natural Resources Ltd (RNRL) stock gained 22 per cent to Rs 82.65 in the week.



Delhi-based Purpleline Investment Advisors CEO PK Agarwal said, "A compromise on the price of the gas is really important for the two parties to arrive at as it will (prevent) the situation (from) getting more complex, which the government may find it difficult to tide over."

However, about the impact on share prices, investors may have already discounted the results of the dispute, and therefore market sentiment may remain unaffected, he added.

The CLSA report further added that a compromise may also be the best way forward as it will lift the uncertainty for Reliance Industries and also provide added clarity on the Dadri (7,480 MW) and Shahapur (2,800 MW) power plants which are key to Reliance Energy (Reliance Power's) overall growth path.

Another analyst from a leading brokerage firm said, "If the dispute turns more complex and impacts the share prices of the two group companies, it may be possible that the two brothers may find ways to reach a compromise."

Regarding the gas dispute, another global research group Macquarie recently said that future contracts need to be closely co-ordinated between buyers, sellers and the government; otherwise "misalignments such as the current one may dissuade future exploration and exploitation of India's mammoth upstream potential".