Core business facing headwinds
We have assumed gas price of $4.2/m BTU (British thermal unit) over FY2013-14 and $7/m BTU from FY2015. We doubt that the government will increase domestic gas prices beyond $6-8/mn BTU given its negative impact on the price-sensitive power and fertilizer sectors.
Other income: We model RILís other income to likely grow strongly over the next few years driven by its increasing cash pile. We expect RIL to generate R677 bn of free cash flow over FY2013-15.
We revise our rating on the RIL stock to Reduce with a 12-month forward SOTP (sum of the parts)-based fair value of R775.
Kotak Institutional Equities
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