Impact Of News On Stock MarketThe news of beginning of gas production from KG Basin D6 Block in coming 2 days has heated up the stock and thereby acting as a great support for the stock at 1500-1550 level to digest the global negative news and has been able to resist at the level giving a great support to the entire capital market of India being the most heavy weightage stock of the major Indices.
Clarification On News
1. KG Basin D6 Block production is estimated at 10 mmscmd of gas in April which will be ramped-up to 40 mmscmd by July and reach peak production of 80 mmscmd in a year.
2. RIL signed gas sale and purchase agreements (GSPA) with 12 urea manufacturers for its 15 Urea manufacturing units of 15.36 mmscmd across the country. These belong to Nagarjuna Fertilisers and Chemicals Ltd, IFFCO, KRIBHCO, Gujarat State Fertiliser Company, National Fertilisers Ltd, Tata Chemicals Ltd, Chambal Fertilisers and Chemicals Ltd, Indo Gulf Fertilisers Ltd, Shriram Fertilisers and Chemicals Ltd, Gujarat Narmada Valley Fertiliser Company, and KRIBHCO-Shyam Fertilisers.
3. The GSPA envisages supply of D6 gas at a landfall price of $4.2 per mBtu. This price excludes pipeline transmission tariff, marketing margin, and State levies.
4. The gas is expected to be available to customers in Andhra Pradesh such as Nagarjuna Fertilisers’
5.This allocation of 15.36 mmscmd will increase Urea production of the country by about 7 million tones against 20mt at present. This will also result in annual fertilizer subsidy saving of about Rs. 3,000 crores for the Centre.
6.The Govt. has first made an allocation of virtually the entire production of first two months to Fertiliser sector and in the second stage will allot 18mmscmd of Gas to Power Sector, for which RIL has to enter into GSPA with Power plants.
Impact Of News
1. Obviously this will also give big cost savings to power generators apart from making many plants run to its optimum capacity, which otherwise were either lying closed or using high cost alternate fuel or were lying closed.
2. This will thus ease the power situation also in the country, maybe from second half of 2009.With RIL, expected to reach its full capacity of gas at 80mmscmd in a year, the country’s gas production will almost double, which is now at about 90mmscmd.
3. We will definitely be seeing a big revolution in the self sufficiency to a great extent of our Gas needs which in turn will make us increase our fertilizer and power production which are key contributors for our economy to grow.
1. This will also be having a positive impact on the financials of RIL. If we calculate a peak production of 80mmscmd of Gas of RIL, this will result in a daily turnover of Rs. 67 crores or Rs. 22,500 crores, annually.
2. On this, RIL is estimated to have a PAT of Rs. 10,000 crores, which would imply an incremental EPS of Rs. 60, on estimated equity base of Rs.1,650 crores, post RPL merger as also ESOP conversion. This kind of profit addition can definitely be expected for FY 11 while it may be to the extent of 30% in the FY10.
3. This will make RIL to grow big which is already heading to become the largest Indian company on various parameters of largest bottomline, largest market capitalization and largest topline company of the country.
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