Reliance Industries fell 3.09% on the BSE on Wednesday, as brokerages such as Edelweiss, Motilal Oswal and IIFL downgraded the company, saying it could take longer to increase gas production at its K-G D6 block. The market capitalisation of Reliance Industries declined Rs 11,000 crore.
Energy giant Reliance, which has the heaviest Sensex weightage dropped as investors ignored a 32% rise in net profit and focussed on gas production concerns and lower-than-expected gross refining margins. On Tuesday, RIL had announced it best-ever earnings, helped by robust performance by its refining and petrochemicals businesses.
?We believe that D-6 gas production will not be able to ramp up for the next two quarters owing to bottlenecks in the pipeline infrastructure that could restrict earnings growth in the E&P division,? Goldman Sachs said in a note. Goldman Sachs cut its 12-month target price on Reliance Industries to Rs 1,090 from 1,160 earlier.
?We are negatively surprised by RIL?s guidance to maintain gas production at 60 mmscmd for the next 9-12 months and the company?s lower-than-expected GRMs,? Edelweiss said. ?The next two quarters are unlikely to yield any earnings surprises as KG D-6 production will remain constant, and refining and petchem margins will be stable,? Elara Securities analyst Alok Deshpande said in a note.
Weakness in Reliance pulled the market lower, said Deven Choksey, managing director and CEO of KR Choksey Shares. On Wednesday, the BSE Sensex closed 120.24 points or 0.67% lower at 17,957.37 points.