RIL Gain - RNRL Loss.

After a five year long fight between the Ambani siblings regarding the KG(Krishna Godavari) Basin gas supply issue has come to an end by supreme court order.  The order was given by the Supreme court favoring the RIL(Reliance Industries Limited) owned by Mukesh Ambani, directing RNRL(Reliance Natural Resource Limited) owned by Anil Ambani to renogiate the deal by adopting an reconciliatory approach.

Supreme court simply verdicted that the Gas is an national asset and governement has right to set the prices of gas.  In simple the verdict is, RNRL cannot get the gas at $2.34/unit.  This is decision has impacted on both the companies stock on the day.  But the huge loss is for Anil Ambani, the stock value of the RNRL has down by 23% on the single day trading, losing market cap of about Rs. 9,000 Cr, not only that other companies holding under ADAG(Anil Dhirubhai Ambani Group) owned by Anil Ambani stocks has also plunged for the day and expected to down more down in future. Reliance Power and Reliance Infrastructure are those whose share prices were down by approximately 9% and 7% respectively. The Mukesh Ambani owned RIL has managed to gain 3% on BSE, where market cap increased Rs. 7,500 Cr.

Now RNRL, is in trouble, because they have to purchase the same for almost double the estimated price, this would lead to an huge negative impact on its operations, as well as in its profits.  A negative impact on Reliance Power, which is going to setup a natural gas based power project in UP.

History/ Case Study of RIL and RNRL Dispute:

Feb, 1999: Reliance Industries Limited, which was undived and Niko Resources, canada based company won the Krisha-Godavari Basin deepsea block.

Oct 2002: Reliance Industries Limited (RIL), found huge gas reserves in the block.

Sept 2003: National Thermal Power Corporation (NTPC), the state power utility tenders for sourcing 12 Million cubic meters a day of Natural gas and LNG to Gujrat for fuel expansion projects.

June 2004: Reliance Energy signs with UP for worlds largest gas based power plant project at dadri.

July 2004: Reliance Industries Limited (RIL), wins the NTPC Tender quoting $2.34/mbtu.

June 2005: By Memorandum of Understanding(MoU), the Reliance Group singed between Mukesh and Anil Ambani to reorganise.  Where Mukesh gets Petrochemicals, and Anil gets Power, Telecom, and Financial Services.

Jan 2006: Reliance Industries Limited (RIL), board approves the gas supply to ADAG.

Sept 2007: Empowered Group of Ministers (EGoM) approves RIL gas pricing ie.,$4.20/mbtu.

Jan 2009: On high court order to make an agreement between the companies for the pricing of gas supply the case was moved to Supreme court in July 2009.

May 2010: SC verdicted that price will be fixed by the government, so the gas cannot be sold for less than $4.20/mbtu.