Mumbai: Shares of Reliance Industries plunged on 22 June after a court ruling that the Mukesh Ambani-led company can not sell its KG basin gas to any company except NTPC and Anil Ambani group’s Reliance Natural Resources.
However, RNRL gained about 3% on the bourses, while shares of Reliance Energy, another Anil Ambani group firm also firmed up by more than 5%.
Shares of state-run NTPC and Petronet LNG also gained ground. Petronet LNG is the only major company importing natural gas into India and might benefit in terms of larger number of customers if RIL is barred from selling the gas to third parties, analysts believe.
The Bombay High Court has asked RIL not to sell the natural gas to be produced from its KG basin block in Andhra Pradesh to third parties except NTPC and RNRL for the first eight years starting 2008.
RIL plans to begin production from the block in July 2008, with initial output of close to 40 million standard cubic metre (mscmd) of gas per day. Peak output would touch 80 mscmd later.
Shares of RIL dropped 1.7% or Rs29.10 a share to close at Rs1,704.05, after hitting an intraday low of Rs1,696.60 on the BSE.
RNRL gained 3.09% to close at Rs 35.05, after hitting an intraday high of Rs 36.90. It was the most traded counter on both BSE and NSE with a collective volume of over 2.5 crore shares changing hands on the two exchanges.
Analysts at domestic brokerage firm Anand Rathi said that RIL could see some negatives on the back of the court ruling, while this could bring gains for RNRL on the other hand.
“RIL of course will contest this (ruling) but the decision could have short-term impact on stock prices since the market has been pricing in expectation of higher gas prices, based on the bids invited by Reliance,“ Anand Rathi analysts wrote in a research note released this morning.
RIL stock has gained considerably in the past couple of days after some brokerages and equity research firms, including Goldman Sachs, raised their target price for the shares on expectations that KG basin gas would boost the company’s earnings.
Another brokerage firm Anagram said that ruling was a dampener for RIL and could mean a serious setback to the company because the realisation could suffer as the two users (NTPC and RNRL) could gang up to arm-twist RIL into pricing its gas lower.
“Companies associated with transport of gas from KG basin to West Coast, might also be adversely impacted,” Anagram analysts said in a report.
“Unless the Supreme Court stays or changes the order, the chief beneficiary of the development would be RNRL, Reliance Energy and NTPC,” it added.
Besides, Petronet LNGs period of good luck could get extended if the gas from KG does not reach the west coast, Anagram said.
On the bourses today, REL advanced by 5.3% or Rs29.80 a share to Rs590.20. It rose to Rs597.40 in the intraday trade.
NTPC rose by 1.7% to Rs152.70, while Petronet LNG gained by 1% to Rs55.