Stock update: RIL

Stock update: RIL

Reliance Industries Ltd told the Supreme Court that its chairman, Mukesh Ambani, had signed the MoU containing provisions to supply gas to RNRL in his personal capacity, and its Board of Directors have not seen and approved the MoU.

The MoU was regarding the supply of 28mmscmd of gas at a 44% discount and a price of $2.34/mmbtu. RIL further claims that RNRL will not be passing on the lower $2.34.mmbtu price to power companies, and will itself make a huge windfall profit of Rs2,100 crore per annum, translating into an astronomical amount of Rs35,000 crore over a 17-year period, without RNRL making any investments.

Thus, RNRL’s windfall gains will result in the government losing large sums of money from profit sharing, royalties and taxes. This will also affect the interest of RIL and its shareholders.

The Supreme Court is going to take the case up for hearing on 20 October. We maintain a BUY on RIL, with a target price of Rs2,340.