RNRL one of our top pick

Dear friends...



I would like to brief you on RNRL's future strategy (based on my
assumptions).

1. For the time being one should forget the RIL-RNRL kg basin gas dispute,
as the advantage of this dispute is already discounted in the RNRL's current
price..


2. RNRL is now sitting on 4 CBM blocks and one NELP block, which requires
huge funds for exploration. though RNRL is having presently Rs. 1000 crores
(710 crores equity and 290 crores assets), it is not sufficient... it
requires minimum 5000 crores to start exploration... it has to raise
funds... but how... is a million dollar question... Reliance group is
masters in raising the funds in best way, minimising interest burden... so
one can expect fund sourcing either in form of low interest loans.... in
form of bonds issue.....in the form of GDRs issue... or in the form of
IPO..... or in the form of stake sale for a overseas exploration giant like
chevron/exxon/mobil etc.... one should seriously think either one will make
this company more prosporus......


3. NELP VII bidding is due in november as per ministry of petrolium
announcement.. RNRL to gear up for bidding... but the bidding norms are 1.
bidder to have exploration expertise/past experience... 2. indian bidder
will be preferred as overseas consortium will not fetch any plus points in
bidding.. since RNRL is not having any exploration experience it will be
disqualified.. So RNRL has to find alternative to have a partner... having
already experience...in indian scenario... those are assam co. and
hind.oilexploration ltd. One should remember anil is already having
10% stake in
Assam co. So anil has to acquire major stake in assam co. to utilise it for
NELP bidding... good sign for both assam co. and RNRL.....


4. RNRL is the fuel management arm for ADAG group... it has to supply fuel
(gas/coal) to REL. As Govt indicated that KG Basin gas will be utilised only
for fertiliser ......... and power sector to wait until 2012(ONGC will start
gas production from KG Basin/mahanadi basin). So power sector has to depend
on coal... RNRL is exploring to import coal from south africa / indonesia in
a massive way for REL and other power sector units... in the mean time RNRL
will explore CBM blocks...


5. Anil is utilising the trump card of AP chief minister, YSR to go for mega
power plant(gas based) at kakinada, so that YSR will stress for max share of
KG gas for AP. But how Anil will succeed is a big question mark....


6. Even in worst scenario... if Anil loose the court case againt RIL.. he
will not loose in term of benifit.... still Anil has to get compensation
from RIL... as RNRL is created as final bargain for RIL demerger(between two
brothers).....


So one can expect good momentum in RNRL business strategy in coming
months..in a positive wind................. by Dec'07, the scrip may touch
Rs. 80 plus....


These are my assumptions based on my close watch on this scrip...


any comments will be highly appreciated.....

Courtesy:-Dr. S. Udaya Bhaskar (UAE)