News Detail

• In an interview with ET Now, Alok Deshpande, Research Analyst, Elara Capital, shares his views on RIL buyback. Excerpts:

• ET Now: There is good news and there is bad news. The good news here is that the buyback price band is at Rs 870 or up to Rs 870 and the bad news here is that the numbers were bad, GRMs have slipped, petrochemical demand is now taking a hit and God knows what is happening in the E&P business.

• Alok Deshpande: Yes, correct. The operational results were not that great. In fact they were below even the lowered number for the Q3, but as far as refining is concerned, Q4 is likely to be better because if you see the GRMs, they were mainly affected by the gasoline and naphtha cracks and they have already recovered so far in Q4. So if you are looking at Q4, you will see a slightly better performance but yes, overall if you see the business performance, it might remain subdued for another quarter or 2 because, we do not see any significant positive trigger for the E&P business. Similarly petchem is likely to remain flattish at best and there can be a mild improvement in GRMs. Coming to buyback, yes it is a positive but I would say it is only a mild positive because unless the company does the whole buyback at a price which is significantly lower than Rs 850, I do not see the EPS accretion in a very big way. So there is a big chance that going into the next quarter or the quarter after that, the operational concerns might take over the positive of buyback.

• ET Now: But do you not think that the buyback will restrict downside in Reliance stock price from the current levels?

• Alok Deshpande : It should restrict the downside to some level but while taking a call, I do not see a very positive trigger in store as such in the next quarter or 2. So probably you can see some bottom at probably Rs 740 or Rs 750 levels. We will be buyers below 725 levels.

• ET Now: How would you dissect the buyback clause which clearly says that the buyback will happen up to Rs 870 which means it is not at Rs 870, it is up to Rs 870?

• Alok Deshpande : Agreed, what the company might have thought is, when they decide on a buyback, there is obviously a maximum amount they must be setting aside of the shareholder money they are willing to use for buyback. So I guess that is how all the calculations were made. The broader amount of Rs 10440 crores must have been agreed upon and depending on that price, the number of shares would have agreed upon. So unless the buyback happens significant below Rs 850 level, we do not see EPS accretion in a very big way.

• ET Now: Do you think the biggest disappointment from the analyst conference call was that there was no guidance given in the D6 volume growth as well and that is something that is not going to go down well with the markets and make traders and investors as well a little uneasy?

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