Reliance Industries shares fall 7 per cent on gas supply ruling | business | Hindustan Times
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Reliance Industries shares fall 7 per cent on gas supply ruling

business Updated: Jun 15, 2009 17:08 IST
Reuters
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The Bombay High Court directed Reliance Industries to supply gas to a former group firm at about half the government-approved price, sending its shares sliding more than 7 per cent.

The Bombay High Court on Monday asked Reliance to supply 28 million metric cubic metres a day for 17 years at $2.34 per million metric British thermal unit to Reliance Natural Resources, Mahesh Jethmalani, a lawyer for Reliance Natural, said.

On January 30, the court had issued an interim order saying Reliance Industries was allowed to sell gas at government- approved price of $4.2 per million metric British thermal units from its KG-D6 block in the Krishna Godavari basin, off eastern India.

Reliance Industries, India's biggest listed conglomerate, is controlled by billionaire Mukesh Ambani while Reliance Natural, engaged in sourcing, supply and transportation of gas, coal and liquid fuels, is headed by estranged younger brother Anil Ambani.

The two firms were contesting details in a supply contract that was originally agreed when the Reliance empire split in 2005.

"Within one month's time we have to enter into an agreement," Jethmalani said.

A Reliance Industries spokesman said the company would comment only after studying the judgment.

"Reliance Industries will have to supply gas at a rate lower than the rate fixed by the government. They are going to incur a lower profit for that much amount," said DD Sharma, vice president at Anand Rathi Securities.

Shares in Reliance Industries, which has a market value of $78 billion, were down 6.8 per cent at 2,195.80 rupees by 0752 GMT, having fallen as much as 7.4 per cent earlier. It dragged the main Mumbai index down 1.7 percent.

Prayesh Jain, an analyst with India Infoline, said the ruling would have a negative impact of around 120 rupees per share for Reliance Industries.

"With this information, sentiment has become weak for Reliance (Industries ) right now."

Shares in Reliance Natural Resources were up 25.1 per cent at 109.20 rupees. The stock was the index's mostly heavily traded by volume.

The judgment gains importance as it arrives only two months after Reliance Industries started pumping natural gas from its massive deep-sea field, which at full throttle will nearly double India's gas output.

The company started pumping 2.5 mmscmd gas from the field in early April, and is expected to reach a peak production of 80 mmscmd before December.

Reliance Industries agreed to sell 11 mmscmd gas from the KG basin to power companies in late April and 15 mmscmd to fertilizer companies in late March.

Reliance Industries has a 90 per cent interest in the block, while Canada's Niko Resources holds the rest.