Posts
![[Most Recent Exchange Rate from www.kitco.com]](http://www.weblinks247.com/exrate/24hr-inr-small.gif)
SHAREHOLDERS of Reliance Industries (RIL) and Reliance Petroleum (RPL) are likely to wait for the merger-swap ratio announcement before deciding on the next course of action. But for thousands of day traders — jobbers as they are known in market parlance — Monday's session will be action-packed, after many weeks of dull trading activity.
While volumes in both stocks are expected to double, the frenetic trading expected on Monday is unlikely to dictate the direction of the broader market, which will continue to take cues from global developments and domestic macro data.
The boards of both companies will meet on Monday to discuss the merger proposal, and the market talk is that the ratio will be announced after the board meeting possibly before market hours. Trading volumes in both stocks are expected to be almost twice, or even more, than those traded on Friday.
For the moment, the widely held view in the market is that the swap ratio may favour RIL shareholders. At Friday's closing prices, one RIL share was worth 16.6 shares of Reliance Petroleum. Investors expect the ratio to be anywhere between 1:16 and 1:20.
Higher the ratio, lower will be the equity dilution for RIL. Conversely, if the swap ratio is less than 16 shares, it will be beneficial for RPL shareholders, and less favourable for RIL shareholders. Religare Securities' president equities Amitabh Chakraborty predicts, "Reliance Industries is likely to surge when it opens on Monday. Investors are advised to buy RIL and sell RPL."
But some veteran traders say that the market seems to have taken it for granted that the ratio will favour RIL shareholders. And given the group's ability to consistently surprise the market, investors could be in for one this time too.
"Whatever the reasons for the merger, RIL shareholders stand to gain over the longer run. That being the case, the promoters will not want to short-change RPL shareholders and hurt its image among the investor community," said a BSE broker, who has been tracking the company for over two decades now.
After buying out Chevron's stake, RIL will hold slightly over 75% in Reliance Petroleum. "If the ratio is 1:16, RIL will issue 7.03 crore shares (4.46% dilution) to RPL's minority shareholders, and if it is 1:20, RIL will have to issue 5.625 crore shares (4% dilution). The bigger picture is that RIL is getting a company with a market cap of about Rs 35,000 crore, for less than Rs 9,000 crore, even if the ratio is 1:16, so it looks unlikely that RIL shareholders will complain if the ratio does not match up to their expectations," he said.
On Friday, RIL shares closed at Rs 1,265, with about 62 lakh shares being traded on both exchanges combined. RPL shares closed at Rs 76.20, with about 92 lakh shares changing hands. RIL sees break-even in KG basin gas ops in 2009-10
RELIANCE Industries (RIL), whose board will meet on Monday to consider the merger of its subsidiary Reliance Petroleum with itself, may incur a projected loss of Rs 4,005 crore from the sale of gas from its D-6 block in the Krishna Godavari (KG) basin in the 2009 fiscal, according to submissions made by the company in the Bombay High Court.
But after incurring a loss in the first year of operations — RIL is expected to start production of gas in March — the company is likely to log bumper profits in the subsequent years. The company says it will be able to make profits of Rs 962 crore in 2009-10, Rs 1,746 crore in 2010-11, Rs 2,255 crore in 2011-12, Rs 2,759 crore in 2012-13 and Rs 3,027 crore in 2013-14.
The initial gas production will be around 40 million metric standard cubic metres per day (mmscmd) which will double by December this year to ensure faster cash flow and gas availability. "We are ramping up production as the government has asked us to do so. The price of gas for the first 5-year period is fixed at $4.2 per mmbtu. It cannot be changed," said RIL's president and CEO for petroleum business, PMS Prasad. However, RIL will have no gas for captive consumption in the initial phase of production as the government is allotting the entire 40 mmscmd to fertiliser and power firms.
The company is investing $8.8 billion for gas production at the KG basin. Of this, it is likely to spend $5.2 billion for doubling the production to 80 mmscmd by December this year. It will pump in another $3.5 billion to maintain the production for the plateau period throughout the life of the field.
The KG-D6 project needs 22 wells to be drilled. The company has drilled 18 wells and will drill the remaining ones by this year end. The country's largest private sector firm made these submission to the high court which is hearing a case filed by Anil Ambani's Reliance Natural Resources (RNRL).
The high court, in an interim order, has allowed RIL to sell gas from the KG basin. It is likely to come out with the final verdict this month.
pandey.piyush@timesgroup.com
While volumes in both stocks are expected to double, the frenetic trading expected on Monday is unlikely to dictate the direction of the broader market, which will continue to take cues from global developments and domestic macro data.
The boards of both companies will meet on Monday to discuss the merger proposal, and the market talk is that the ratio will be announced after the board meeting possibly before market hours. Trading volumes in both stocks are expected to be almost twice, or even more, than those traded on Friday.
For the moment, the widely held view in the market is that the swap ratio may favour RIL shareholders. At Friday's closing prices, one RIL share was worth 16.6 shares of Reliance Petroleum. Investors expect the ratio to be anywhere between 1:16 and 1:20.
Higher the ratio, lower will be the equity dilution for RIL. Conversely, if the swap ratio is less than 16 shares, it will be beneficial for RPL shareholders, and less favourable for RIL shareholders. Religare Securities' president equities Amitabh Chakraborty predicts, "Reliance Industries is likely to surge when it opens on Monday. Investors are advised to buy RIL and sell RPL."
But some veteran traders say that the market seems to have taken it for granted that the ratio will favour RIL shareholders. And given the group's ability to consistently surprise the market, investors could be in for one this time too.
"Whatever the reasons for the merger, RIL shareholders stand to gain over the longer run. That being the case, the promoters will not want to short-change RPL shareholders and hurt its image among the investor community," said a BSE broker, who has been tracking the company for over two decades now.
After buying out Chevron's stake, RIL will hold slightly over 75% in Reliance Petroleum. "If the ratio is 1:16, RIL will issue 7.03 crore shares (4.46% dilution) to RPL's minority shareholders, and if it is 1:20, RIL will have to issue 5.625 crore shares (4% dilution). The bigger picture is that RIL is getting a company with a market cap of about Rs 35,000 crore, for less than Rs 9,000 crore, even if the ratio is 1:16, so it looks unlikely that RIL shareholders will complain if the ratio does not match up to their expectations," he said.
On Friday, RIL shares closed at Rs 1,265, with about 62 lakh shares being traded on both exchanges combined. RPL shares closed at Rs 76.20, with about 92 lakh shares changing hands. RIL sees break-even in KG basin gas ops in 2009-10
RELIANCE Industries (RIL), whose board will meet on Monday to consider the merger of its subsidiary Reliance Petroleum with itself, may incur a projected loss of Rs 4,005 crore from the sale of gas from its D-6 block in the Krishna Godavari (KG) basin in the 2009 fiscal, according to submissions made by the company in the Bombay High Court.
But after incurring a loss in the first year of operations — RIL is expected to start production of gas in March — the company is likely to log bumper profits in the subsequent years. The company says it will be able to make profits of Rs 962 crore in 2009-10, Rs 1,746 crore in 2010-11, Rs 2,255 crore in 2011-12, Rs 2,759 crore in 2012-13 and Rs 3,027 crore in 2013-14.
The initial gas production will be around 40 million metric standard cubic metres per day (mmscmd) which will double by December this year to ensure faster cash flow and gas availability. "We are ramping up production as the government has asked us to do so. The price of gas for the first 5-year period is fixed at $4.2 per mmbtu. It cannot be changed," said RIL's president and CEO for petroleum business, PMS Prasad. However, RIL will have no gas for captive consumption in the initial phase of production as the government is allotting the entire 40 mmscmd to fertiliser and power firms.
The company is investing $8.8 billion for gas production at the KG basin. Of this, it is likely to spend $5.2 billion for doubling the production to 80 mmscmd by December this year. It will pump in another $3.5 billion to maintain the production for the plateau period throughout the life of the field.
The KG-D6 project needs 22 wells to be drilled. The company has drilled 18 wells and will drill the remaining ones by this year end. The country's largest private sector firm made these submission to the high court which is hearing a case filed by Anil Ambani's Reliance Natural Resources (RNRL).
The high court, in an interim order, has allowed RIL to sell gas from the KG basin. It is likely to come out with the final verdict this month.
pandey.piyush@timesgroup.com
The initial output will double by December for better cash flow
0 comments:
Post a Comment