Reliance Industries (BOM:500325)

QUOTE AND NEWS
The Economic Times  Dec 1  Comment 
Reliance Industries Chairman Mukesh Ambani's laid out the future plan for his Jio, saying his disruptive telecom idea has crossed 50 million customers.
Reuters  Nov 24  Comment 
A fire broke out at the refinery site of Reliance Industries in Gujarat but there was no hit to the production, the company said in a statement on Thursday.
The Economic Times  Nov 22  Comment 
Buy Reliance Industries Ltd. at a price target of Rs 1020 and a stop loss at Rs 978 from entry point
The Hindu Business Line  Nov 17  Comment 
Reliance Industries and GE on Thursday announced the signing of a global partnership agreement in the Industrial Internet of Things (IIOT) space whereby the two will work together to build joint app...
The Economic Times  Nov 16  Comment 
After deducting USD 71.71 million royalty paid on the gas produced and adding an interest at the rate of Libor plus 2 per cent, totalling USD 149.86 million, a total demand of USD 1.55 billion was made on RIL, BP and Niko.
The Hindu Business Line  Nov 14  Comment 
Reliance Industries’ partner Niko Resources of Canada has put on sale its 10 per cent stake in the flagging KG-D6 gas block off the east coast. Financially strained Niko had in February last year ann...
The Economic Times  Nov 11  Comment 
Among the seven pioneering companies in India displaying exemplary performance on evidence-based assessment, Reliance has scored the highest.
The Economic Times  Nov 7  Comment 
With this ONGC has given a new thrust to the demand from Reliance Industries, BP Plc, and other private sector gas producers in the country to free up pricing.
The Hindu Business Line  Nov 6  Comment 
Reliance Industries has been slapped a $1.55 billion compensation notice by the Centre for using gas from ONGC’s adjacent fields off the Andhra Pradesh coast. There is, however, an ironic backgro...
The Economic Times  Nov 6  Comment 
Calgary-based Niko Resources Ltd, which holds 10 per cent interest in RIL-operated KG-DWN-98/3 or KG-D6 block, said the partners believe they are "not liable for the amount claimed by the Government of India."





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Business Profile

Reliance Industries (RIL), established in 1966, is the flagship company of the Reliance group. The company started with textiles and thereafter backward vertical integrated in polyester, fiber intermediates, plastics, petrochemicals, petroleum refining and oil and gas exploration and production.

RIL is a leading producer of polyester yarn and fiber producer and amongst the major producers of petrochemical products in the world.

The company`s operations can be classified into three segments that of petroleum refining and marketing business, petrochemicals business and others (including crude oil and natural gas exploration and production business)

Presently, the company`s activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals), textiles and retail.

Some of RIL`s group companies include Reliance Petroleum (RPL), Reliance Retail, Indian Petrochemicals Corporation (IPCL) and Reliance Industrial Infrastructure.

RIL has manufacturing facilities at Naroda, Patalganga, Hazira and Jamnagar.


RIL has rallied 16% over last month even as refining margins have fallen. Lower-thananticipated margins present the biggest risk to our estimates and valuation. We maintain our Rs1,850 target price and downgrade the stock from Hold to Sell.

Refining looking shaky Singapore complex refining margins have averaged US$4.6/bbl to date in 2QFY09, according to Reuters, compared to US$8.2/bbl in 1QFY09 and US$6.4/bbl in 2QFY08. Gasoline margins have been weak even in the traditionally strong April-July period as US demand has declined. Given US car manufacturers are replacing their truck plants with small car plants, this decline could be structural rather than cyclical. Middle distillate (diesel/jet fuel) margins have been very strong (US$30/bbl+) since March 2008, but have dropped by US$10/bbl in August. Basically, demand growth appears to be slowing down just as new refining capacity is set come on stream. We believe the refining cycle will turn down from FY09 and forecast RIL GRMs will decline from US$15/bbl in FY08 to US$12.5/bbl in FY10. But, just as the upside in GRMs over last three years was under-estimated by the market (RIL GRM in FY04 was US$6.4/bbl), it is possible the downside will also end up looking worse.

Upsides all in E&P We have assumed that RIL will sell 40mmscmd of gas to RNRL/NTPC for the next 17 years at the disputed contract price (US$2.6mmbtu), however litigation on this issue is continuing. If there were no such liability, our FY10 and FY11 EPS estimates would rise to Rs206 and Rs192 respectively and our valuation could increase to Rs2,000, assuming no other changes. There is potential for surprises in terms of large new discoveries. However, our valuation is based on a gross reserve estimate of 7.7bn boe by March 2009, compared to RIL's disclosed 2P reserve estimate of 4.4bn boe.

Downgraded to Sell, target price Rs1,850 We maintain our EPS estimates and our SOTP-based target price, which values RIL as of end- FY09 (post conversion of promoter warrants). Our estimates factor in no government policy risks from any imposition of minimum alternate tax (MAT) on Reliance Petroleum, loss of tax holiday for gas production or any export tax on refined products.

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