Share prices of Anil Dhirubhai Ambani Group (ADAG)-promoted Reliance Natural Resources Ltd (RNRL) and Reliance Power Ltd (R-Power) today shot up despite a fall in the broader market, thanks to the Centre diluting its stand on the Krishna-Godavari (KG) basin gas row in the Supreme Court.
RNRL rose 2.38 per cent to close at Rs 86.15 and R-Power gained 0.72 per cent to end at Rs 160.30 on the Bombay Stock Exchange (BSE) today. But the share of Mukesh Ambani’s Reliance Industries (RIL) fell 0.52 per cent to Rs 1,971 on the exchange in line with the Sensex, which dipped 0.54 per cent.
In July this year, the Centre had jumped into the dispute between the two Ambani brothers, Anil and Mukesh, over the distribution and pricing of KG gas as per a family agreement, by stating that the country’s natural resources were the government’s property. It had also questioned the validity and legality of the Ambanis’ family memorandum of understanding (MoU). This had been a major blow for Anil Ambani as it could have dashed his hopes of getting gas from the basin.
Surprisingly, the government yesterday amended its special leave petition (SLP) filed before the apex court and de-linked itself from the dispute between the two brothers. “It is not the intention of the government to enter into private arrangements between parties and question the validity or legality of the MoU...,” the government said in its petition.
However, according to market analysts, the rise in the stock prices of the two ADAG firms was nothing but a mere overflow of investor sentiment.
“Even if the gas dispute is settled, Anil Ambani will not be in a position to lift 28 mmscmd gas from the KG basin at $2 per mmscmd as per the MoU at least till March 2012. Anil has plans to increase his power production to 7,500 mega watt, which will take not less than three years. And RIL has the capacity to produce 120 mmscmd gas from the D6 block alone at 80 cents per mmscmd. So, even if RIL brings down its gas price further, it can still make huge profits,” said independent equity advisor SP Tulsian.
Currently, the country produces 90 mmscmd of gas annually and, according to Tulsian, there will be more supply than demand for gas when other companies like ONGC scale up their production and other blocks in KG basin become operational.
Since Monday, the share price of RIL has declined by 4.79 per cent, while the Sensex has fallen only 2.89 per cent during the period. On the other hand, R-Power has posted a marginal fall of 0.52 per cent and RNRL a small gain of 0.52 per cent since Monday.
