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Our Bureau

Mumbai, Nov. 23 Reliance Industries Ltd (RIL) was among the top gainers on the bourses as the scrip rose on the back of last week’s news of the company submitting a non-binding cash offer to take a controlling interest in chemicals maker LyondellBasell Industries.

The RIL stock gained over 3.3 per cent to Rs 2,195.5 at the day’s close on BSE, while on NSE the stock gained almost 3.3 per cent on Monday.

There was across-the-board buying in this stock as the news of the deal is being taken positively by the market, said Mr Gaurav Dua, Head of Research, Sharekhan. The buying pressure lifted the stock price of Reliance Industries, he added.

The upward movement in the market was largely due to the Reliance announcing the bid, said market men. Reliance Industries has a weightage of 14 per cent in the Sensex index.

Reliance Industries had said on Saturday that they have submitted to LyondellBasell a preliminary non-binding offer to acquire for cash a controlling interest in LyondellBasell that has a market valuation of $55 billion. A large section of market men, feel that if the deal happens, it is positive for the stock as the company will get the assets of the global company at cheaper rates. Also according to the head of research of a broking firm, Reliance Industries is priced at a premium compared to its global counterparts and the existing activity does not justify the pricing.

“With revenue that is nearly five times RIL’s petrochemical revenues, Lyondell Basell has the potential to offer a significant size advantage, global reach and geographical diversification to RIL,” says a research report from HSBC Global Research.

According to a research report by Angel Broking, “one of the challenges for RIL would be maintaining LyondellBasell’s margins”. LyondellBasell and its competitors in the region are likely to face stiff competition, as low cost assets come online in other regions, it said.

One hurdle for this is the litigation between LyondellBasell’s unsecured and secured creditors. Lyondell also faces a lawsuit filed by unsecured creditors, alleging that Basell’s 2007 buyout left the company with unmanageable debt. This dispute is interfering with LyondellBasell’s ability to exit bankruptcy protection, the report from Angel Broking said.

Although the stock is reacting positively, post the announcement it is a knee jerk reaction and in the long-term, the stock will get impacted negatively once the deal proceedings start, said a fund manager.

All the mega global deals such as the Tata-Corus deal, Jauguar Land Rover deal had impacted their stock price negatively, said a broker.

The RIL scrip is also noticing high buying interest as the bonus issue, for which the record date has been set at November 27.

Meanwhile, the London Stock Exchange cancelled London all automatic trades in Reliance GDR after it surged 105 per cent to $93.20 in London. Trade halted as some didn’t pick price change post-Reliance GDR bonus, said LSE.

More Stories on : Petroleum | Mergers & Acquisitions | Stocks | Reliance Industries Ltd

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