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March 21, 2001
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Money > Stocks > Market Impact > Report March 21, 2001 |
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RIL to gain from dilution of RPL stake, say analystsNetScribes/Rajiv Banerjee Reliance Industries Limited's decision to divest 13 per cent of its stake in Reliance Petroleum Limited is expected to benefit the parent more than the subsidiary. Analysts said that while RIL will be able to reduce its debts through the cash inflow post-divestment, RPL will gain only if the stake is sold to a strategic investor who will help it become a global player. An oil & gas analyst at SG Asia Securities said that RPL would benefit only if a strategic investor was roped in. The scenario is likely to be different if RIL opts for the ADR/GDR route instead. "RIL will benefit primarily due to the cash flows that will come into its kitty," he said, adding, if the divestment happens at a premium, it would augur well for RIL in terms of long-term capital gains. An analyst at Dalal & Broacha Stock Broking Pvt Ltd said that the positive cash flow on account of the divestment would help RIL retire its debts. "Apart from the divestment in RPL, there is Reliance Infocom -- another good story in the making. It is possible that RIL may also divest some stake in Infocom in the future. Thus, the outlook for RIL looks brighter," the analyst said. RIL's announcement of a dilution of stake would attract strategic investors for RPL, added a petrochemical analyst at Pranav Securities. "The divestment of 13 per cent of the 64 per cent stake in RPL leaves room for a strategic investor to step in and thus enable RPL to have a presence in the global markets," he said. On Wednesday, the RPL stock gained on sentiment and closed at Rs 52.95 on the Bombay Stock Exchange, up Rs 2.70 from its previous close. A total of 3.3 million shares have been traded at the counter. At its current market price, RPL is trading at a PE multiple of 16 and an estimated EPS of Rs 3.11. RIL closed at Rs 402.60, up Rs 28.60 from its previous close. A total of 2.3 million shares were traded at the counter.
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