Macquarie reiterates 'Outperform' on RIL, SOTP of Rs 1,293/share
The rating also factors in the resurrecting GRMs, upstream upsides from domestic assets and an NPV-accretive acquisition like Marcellus Shale coming through.
By ET Bureau |
MUMBAI: Post Supreme Court’s 2-1 ruling in favour of Reliance Industries in the KG D6 gas dispute case with Reliance Natural Resources Ltd, Macquarie has reiterated its ‘Outperform’ rating on RIL, with an SOTP of Rs 1,293 per share.
The rating also factors in the resurrecting GRMs, upstream upsides from domestic assets and an NPV-accretive acquisition like Marcellus Shale coming through.
Pending renegotiation, the exact impact on KG D6 valuation is still not concrete, but an upside of Rs 20 per share over base case is likely, Macquarie said.
The apex court has upheld the government’s stance of it being the owner of the gas, and thus having the power to control its pricing and allocation. The court has categorically stated that the "Government has power to decide gas pricing and valuation".
The Production Sharing Contract (PSC) signed between the government and RIL for the KGD6 gas (which detailed pricing at $4.2/mmBtu) has been held sacrosanct. Any private agreement like the memorandum of understanding between the Ambani brothers is deemed subservient to the PSC, and hence the court can only take cognisance of it but not direct its implementation.
The apex court has said that government is the owner of all gas assets till delivery to consumer, which points towards the Gas Utilization Policy (GUP) being supreme. The GUP places ADAG's proposed Dadri power project lower in the allocation priority, as it is a greenfield power project.
RIL-RNRL have been told to renegotiate within the ambit of the PSC and revert within 6-8 weeks. If they are not able to reach a consensus, the matter may end up at the Company Law Board. But it is unlikely that they may go against the apex court tone and tenor of the verdict.
Legally, RNRL can ask for a review of the judgement, however it seems improbable, Macquarie said.
The rating also factors in the resurrecting GRMs, upstream upsides from domestic assets and an NPV-accretive acquisition like Marcellus Shale coming through.
Pending renegotiation, the exact impact on KG D6 valuation is still not concrete, but an upside of Rs 20 per share over base case is likely, Macquarie said.
The apex court has upheld the government’s stance of it being the owner of the gas, and thus having the power to control its pricing and allocation. The court has categorically stated that the "Government has power to decide gas pricing and valuation".
The Production Sharing Contract (PSC) signed between the government and RIL for the KGD6 gas (which detailed pricing at $4.2/mmBtu) has been held sacrosanct. Any private agreement like the memorandum of understanding between the Ambani brothers is deemed subservient to the PSC, and hence the court can only take cognisance of it but not direct its implementation.
The apex court has said that government is the owner of all gas assets till delivery to consumer, which points towards the Gas Utilization Policy (GUP) being supreme. The GUP places ADAG's proposed Dadri power project lower in the allocation priority, as it is a greenfield power project.
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RIL-RNRL have been told to renegotiate within the ambit of the PSC and revert within 6-8 weeks. If they are not able to reach a consensus, the matter may end up at the Company Law Board. But it is unlikely that they may go against the apex court tone and tenor of the verdict.
Legally, RNRL can ask for a review of the judgement, however it seems improbable, Macquarie said.
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