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Compromise may hold the key to Ambanis` gas dispute: Analysts

Last Updated: Sunday, July 19, 2009 - 16:27

New Delhi: The solution to the protracted gas supply dispute between the two Ambani brothers that has reached the Supreme Court may come through a compromise, some analysts said, fearing that the row could well impact the stock prices of group companies of both.

"The issue (gas dispute) is vexed, therefore, and may
eventually require a compromise. Pricing holds the key ...,"
global research firm CLSA said in a research note.

Anil Ambani group firm RNRL and Mukesh Ambani-led RIL
have filed cross-petitions in the Supreme Court challenging
the Bombay High Court order and the matter will come up for
hearing tomorrow.

While RNRL wants immediate implementation of the order to
get the gas at USD 2.3 per mmBtu, a price 44 percent lower
than the one fixed by the government, RIL says it cannot
supply the industry fuel without the consent of the

Incidentally, the global spot price of the gas is
hovering at around USD 3 per mmBtu though the long-term
contract price is ruling higher at USD 8 per mmBtu.

The shares of Reliance Industries have gained over 10 percent this week to settle at Rs 1,933 on the Bombay Stock Exchange on Friday, while the Anil Ambani group firm Reliance Natural Resources Ltd (RNRL) stock gained 22 per cent to Rs 82.65 in the week.

Delhi-based Purpleline Investment Advisors CEO PK Agarwal
said, "A compromise on the price of the gas is really
important for the two parties to arrive at as it will
(prevent) the situation (from) getting more complex, which the
government may find it difficult to tide over."

However, about the impact on share prices, investors
may have already discounted the results of the dispute, and
therefore market sentiment may remain unaffected, he added.

The CLSA report further added that a compromise may also
be the best way forward as it will lift the uncertainty for
Reliance Industries and also provide added clarity on the
Dadri (7,480 MW) and Shahapur (2,800 MW) power plants which
are key to Reliance Energy (Reliance Power`s) overall growth

Another analyst from a leading brokerage firm said, "If
the dispute turns more complex and impacts the share prices of
the two group companies, it may be possible that the two
brothers may find ways to reach a compromise."

Regarding the gas dispute, another global research group
Macquarie recently said that future contracts need to be
closely co-ordinated between buyers, sellers and the
government; otherwise "misalignments such as the current one
may dissuade future exploration and exploitation of India`s
mammoth upstream potential".

Bureau Report

First Published: Sunday, July 19, 2009 - 16:27

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