>RELIANCE INDUSTRIES (ANAND RATHI)

■ RIL-ADAG overhaul non-compete agreement. RIL and ADA group companies have signed and approved an agreement canceling all existing non-compete arrangements entered into between them in Jan ’06 pursuant to the reorganization of the Reliance group. They have now entered into a new non-compete agreement with respect to only gas-based power generation for the period extending until Mar ’22.

■ New opportunities for RIL to deploy excess cash. With the change in the non-compete agreement, RIL now has the freedom to explore investment opportunities in the telecom, power, and financial services segments. While some of these businesses were expected to be out of the non-compete framework after five years of initial de-merger of businesses of the Reliance group, it seems that for businesses like telecommunication, the non-compete agreement was (earlier) until 2015.

■ Gas agreement under negotiations. RIL’s statement said that they expect to expeditiously negotiate and conclude the gas supply arrangement with RNRL in accordance with the orders of the Supreme Court. We believe that the role of the government still remains critical, as any gas allocation to RNRL or its affiliate can only be done by the government and not by RIL, as per the
existing gas utilization policy.

■ Valuation. At our target price of Rs1,150, RIL offers 15% upside to current market price.

To read the full report: RIL