HOPES of better quarterly earnings, backed by improved refining margins, have fuelled the recent rally in shares of petrochemical giant Reliance Industries (RIL), the country’s largest private sector company.
The RIL shares have risen nearly 8% over the past week compared to a 2% rise in the 30-share Sensex, and closed at Rs 1,067 on Wednesday. According to analysts, the RIL’s decision to avoid getting into a bidding war for acquiring LyondellBasell could have also helped the shares firm up despite volatile market conditions. The RIL stock climbed nearly 4% compared to 1.3% rise in the Sensex on Tuesday. It was the most actively-traded stock on stock exchanges, clocking volumes and turnover of 15.1 lakh shares and Rs 159 crore, respectively, on the Bombay Stock Exchange (BSE). “Strategically, the deal would have boosted the company’s longterm growth prospects, though investors had some concerns about its short-term impact on the company. However, with the rejection of the RIL’s bid, investors have now started focusing on fourth quarter numbers,” said an analyst on condition of anonymity. Early this month, the board of LyondellBasell rejected the RIL bid to acquire the Netherlands-based bankrupt company, though the Indian company raised its offer from $13.5 billion to $14.5 billion.
“The current rally in the RIL shares has mainly been triggered by expectations of a boost in quarterly numbers amid better refining margins. We estimate the company to report net profit in the range of Rs 5,700 to Rs 5,900 crore during the current quarter compared to Rs 4,000 crore in the previous quarter,” said KR Choksey Shares and Securities’ research head Maulik Patel. The market was concerned that any further increase in bid for LyondellBasell would have affected value creation for RIL and so it reacted positively to the rejection of the latter’s offer.