Reliance Industries Winners Curse-EdelCap

One of the key determinants of Reliance Industries’ (RIL) earnings visibility and stock performance will be the start of its gas production. However,production is subject to resolution of the legal dispute between RIL andReliance Natural Resources (RNRL). Ironically, amongst all the possible outcomes, RIL winning the case (currently in the high court) will be the worst for RIL investors since that could delay the start of gas production, assumingRNRL appeals in the Supreme Court (SC). Thus, an out-of-court settlement seems to be the likely outcome.

Despite medium-term risks from its gas business, our long-term view on the stock remains positive (especially given the potential exploration upsides). At INR 1,212, RIL trades at 10.0x FY10E EPS. We maintain our ‘BUY’ recommendation on the stock.


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