Shares of Reliance Industries Ltd (RIL) opened under pressure, giving up gains from yesterday even after a late evening announcement that the company will further invest Rs 40,000 crore with its partner BP Plc towards the development of its flagship gas production block KG D6 in Krishna Godavari basin, off India’s east coast. With this new investment, Reliance Industries expects to bring in 30-35 million cubic meters of natural gas production per day and sustain it over the next 7-8 years, Mukesh Ambani said. The new government policies facilitated fresh investments in the ageing KG-D6 block, Mukesh Ambani said.
Bank of America Merril Lynch has a target price of Rs 1450 on RIL with estimates of a Net Present Value of Rs 28 per share from KG D6 investments after this announcement. While Morgan Stanley set the price target at Rs 1506 and said RIL remains on track to deliver Free Cash Flows by mid-2018. Global brokerage CLSA has raised the target price on Reliance Industries’ shares to Rs 1,710 from Rs 1,500 and maintained its ‘buy’ rating on the stock. jP Morgan has set the target price for RIL at Rs 1310 against a CMP of 1385.
Yesterday, RIL shares jumped ahead of a joint address by company chairman Mukesh Ambani and BP Plc’s group chief executive Bob Dudley. Reliance shares were up 2.1% at Rs 1,384.50 after rising to the day’s high of Rs 1,394.25.
Reliance Industries’ shares are on a sustained rise and have surged over 28% so far this year on prospects of fresh incomes from its petrochemicals and refining business’ under-commissioning facilities, and cash flows from its telecom business, which had seen heavy investments so far.
Earlier this year CLSA had maintained its ‘buy’ rating on the stock, citing optimistic commentary by the company management on its telecom venture Reliance Jio, while also raising the valuation multiple on the refining business.
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The renewed investments in the KG-D6 fields will reduce India’s import dependence by as much as 10% by the year 2022, Bob Dudley said. The increased production will be equivalent to $20 billion worth of LNG imports, he said. Reliance Industries also said it would continue to make periodic announcements on KG-D6 developments over the next one year. Mukesh Ambani said he expects the new fields in the KG-D6 block to come onstream from the year 2020.
A little far back, late last year, news reports said that BP Plc may enter into a joint venture with Reliance Industries for launching a fuel retailing business in India. The British firm has an in-principle approval to open 3,500 fuel stations across the country. On the other hand, Reliance Industries has about 1,200 petrol and diesel retail pumps.