Mumbai: The relief rally in the global markets and damage control efforts over the weekend seem to have paid off for the Reliance-Anil Dhirubhai Ambani Group, or R-Adag, as all but one of its firms posted modest to large gains on Monday.
Investors rushed to sell the group’s stocks on Friday after an apex court ruling dashed its hopes of getting cheap natural gas.
While Reliance Natural Resources Ltd, or RNRL, R-Adag’s fuel-trading firm, dipped nearly 5% to Rs50.15 per share on the Bombay Stock Exchange (BSE), utility firm Reliance Infrastructure Ltd and Reliance Power Ltd gained 8.5% and 6.3% to close at Rs1,062.85 and Rs148.9, respectively.
RNRL was trying to secure cheap gas for the Dadri plant owned by R-Power. R-Infra holds a 45% stake in R-Power.
Estranged older brother Mukesh Ambani-owned Reliance Industries Ltd (RIL) ended the day at Rs1,080.2 per share, up 4.5% and outstripping the 3.35% gain posted by the bellwether Sensex that closed at 17,330.55 points.
Graphic: Ahmed Raza Khan/Mint
The Supreme Court had said RIL could only give natural gas from its prolific Krishna-Godavari D6 block at the government-mandated price to buyers specified by the government’s gas utilization policy, effectively ruling out RNRL’s demand for the fuel at a 44% cheaper price as laid out in a 2005 family demerger pact.
This shaved off around Rs11,210 crore from the collective market capitalization of R-Adag firms on Friday. It recovered Rs5,043.24 crore on Monday.
The stock had underperformed the market over the past one month, falling 11.5% compared with the Sensex’s 6.68% decline. It had underperformed in past one quarter as well, declining 5.5% against the 5.36% rise in the Sensex, according to a posting on the IndiaInfoline brokerage website. The IndiaInfoline report added that the shares shot up after a prominent foreign broker maintained an overweight rating on the stock with a revised target price of Rs1,280 per share.
Meanwhile, R-Power, in an announcement on BSE, said it had approved 20 million employee stock option shares that “will vest at the end of one year from the date of grant” and can be exercised up to “nine years from the date of vesting”.
R-Infra and R-Power chief executives Lalit Jalan and J.P. Chalasani, respectively, had over the weekend briefed Mint saying there were multiple suppliers of gas that could fuel the Dadri power plant and the court ruling will have very little impact on their respective businesses.
Rating agency Moody’s Asia Pacific Ltd experts Nidhi Dhruv and Philipp Lotter wrote in Moody’s Weekly Credit Outlook on 10 May that the ruling “will save RIL from an annual reduction in Ebitda (earnings before interest, tax,depreciation and amortization) of around $600 million (Rs2,700 crore), beginning in two-three years when RNRL’s as-yet-unbuilt power plants come online”.
By that time, RIL’s total annual Ebitda is expected to have grown to between $9 billion and $10 billion.
Dhruv and Lotter also said the verdict could attract more investment in exploration and production sector as it will “lead to a more predictable environment..., reassure potential investors and improve the prospects of the country’s overall energy industry”.