Reliance Industries – ‘A great match’ – BUY
CMP Rs957, Target Rs1,175, Upside 22.8%
Reliance Industries Ltd (RIL) and BP announced a major deal for E&P and gas marketing businesses. The highlights of the deal are as follows:
± BP will take a 30% stake in 23 oil and gas production sharing contracts that RIL operates in India , including the producing KG D6 block
± A 50:50 joint venture will be formed between the two companies for the sourcing and marketing of gas in India
± BP will pay RIL an aggregate consideration of US$7.2bn for the interests to be acquired in the 23 production sharing contracts.
Implications for RIL
± Deepwater technology expertise of BP to help RIL
± Lower interest outgo to offset lower profits from E&P EBIT from FY12
± Cash-flows to be strong for FY12
± Funds to be utilized for investments in other avenues such as power, telecom, shale gas etc
± Deal values RIL’s 23 blocks at US$24bn
Maintain BUY with a target price of Rs1,175
Warm Regards,
India Infoline Research Team
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