RIL –Buy- Angel Securities
Reliance Industries (RIL) and Reliance Natural Resources (RNRL) have entered into a new gas supply agreement, as directed by the Supreme Court. The Supreme Court had ordered the two companies to renegotiate the Gas Supply Master Agreement, which was signed between the Ambani brothers as part of the business de-merger in 2005.
While the companies have not disclosed the details of the agreement, however, speculation is that RIL will supply 28 million mmscmd (metric standard cubic metres) to RNRL for 17 years at the government fixed price of $ 4.2/mmbtu. The quantity and the term of the supply are likely to be determined by the EGoM. With the gas supply agreement in place, the ADAG Group will now speed up its power generation projects.
It may take 3–4 years for creating a gas-based generating capacity of 8,400 MW, including its existing projects and the upcoming one in Dadri, Uttar Pradesh. The move improves the project visibility for upcoming power projects of ADAG. However, it does not have much implication on RIL. We continue to maintain BUY on RIL with a target price of Rs1,260.
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