Investment in Reliance Petroleum (RPL)
Posted by JV on November 26, 2006
I have invested some good amount in Reliance Petroleum (RPL) at the average price of Rs.66+. And I expect to grow my investment as any other reliance scrips, particularly Reliance Industries (RIL). I have invested little sum in other Reliance companies, like Reliance Communication and Reliance Energy. I am waiting for Reliance Industry to come down little before I invest something in it.
Now with RPL, the actual business will not start before 2008-09, however the company has hinted that may be the production will start bit earlier,, about six months earlier than the declared date. So, its first profit and EPS (if any) will be seen in somewhere 2010.
However, looking the tax and other benefits on account of operating from SEZ, RPL will be having upper hand over the most refineries. Its profit margin will be nearly double than other in the sector. I do not know much about its business preposition.
Shareholding pattern is mammoth in every sense RPL has issued 450,00,00,000 (450 crore, 4500 millions) equity shares. Out which 75 % stake is held by RIL as promoter/parent company at the face value of Rs. 10-00. 5% of stake is sold to Chaveron for USD 300 millions at about Rs.60-00 per share with agreement of additional purchase of 24% of shares, from the stake of RIL.
About 8.8 % shares are held by institutional investors like banks,MF, FII, Insurance co. etc. Rest of 11.11 % are held with non-institutional and private investors , and out of these 11.11 %, 3.95 are with body corporates, and therefore only 6.41 % are with individuals who have less than 10,000- shares. Nearly 90% are locked-in shares. Therefore looking to little percentage , though the number of share will be somewhat 28 crores, in the trading market make the scrip attractive.
I am not share market analyst, but looking to the facts at the present Rs.66-00 is good investment in long term of 3-5 years. I have been investing in RPL from the price of Rs. 60-00, and I am averaging the price at every opportunity. However, the production is not starting at least for 2 years, but still price of the scrip is slowly rising, probably by the investors purchasing and holding the shares and causing scarcity in the market.
What I expect is to double my investment , and I believe it will happen as soon the production is started. I expect the price at Rs. 120-140 in year 2008-2009, average Rs. 3-00 increase every month during next 2 years.
Further , even when the target price is achieved , still I may not consider to sell my holding. I believe when RPL starts making profit, and mostly from the firs year, it will declare generous dividend. Suppose, RPL declares 50% dividend, Rs.5-00 per share, still I am getting 11 % on my actual investment, additional to the price appreciation. By the dividends from RPL , RIL will be having tax free income in billions. (side note : therefore, some people prefer to buy RIL instead of RPL, because of 75% stake of RIL and as soon RPL is appreciated, RIL will be benefited). Further I expect some right issues (not much of bonus) in early years to increase capital for expansions by the company. However I am not sure about this investment plan, but I feel it will happen more likely that or better.
Few of my friends apprehend that RPL may be again merged with RIL as it happened previously in 2002. I have no firm idea about the business tactics. But RPL is based in SEZ having all the benefits, therefore, as per my knowledge it is not permissible to merge SEZ unit with ordinary unit, otherwise all benefits are removed.
Note of caution : I am not expert on shares etc., all information,data are available in public and views are strictly mine’s. And I do not encourage to buy , in case if you want to you are requested to consult professional share broker. I am not liable for any losses, if any.
I welcome any suggestions and advise from the better equipped and better informed persons. And even you have some doubt or query, let me know it will be helpful to discuss over it.
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Nita Jatar Kulkarni said
I would suggest that where Reliance is concerned one should be careful. I think this company is anything but reliable. I wouldn’t be surprised if it got involved in some sort of scam or the other one of these days.
JV said
I cant disagree with you on this thing. But you can see that how much Reliance is gaining over on the life of an ordiniary man. We buy Enrgy,Gas,Mobile,Petrol & Diesel, Insurance, soon grocerry too (and dont know what more)from Ambanis.
My guess is that an average urban person will be paying atleast Rs.1,000-00 p.m. to Ambanis for all these utilities. So I am getting back these from Ambanis by holding shares of various companies
BTW Reliance Communication and Reliance Energy are faring very well in the market covering my annual expenditures on mobile and electriciy
GYANESH TIBREWAL said
DEAR SIR,
REILANCE PETROL SHEAR I WANT 100 (HUNDRED).
FROM:GYANESH TIBREWAL
BOY said
DEAR SIR,
RELIANCE PETROL SHEAR I WANT 1000 (THOUSAND)
BUT WILL I GET ? LETS WAIT AND WATCH AND LET TIME DECIDE.
masthan said
DEAR SIR,
RELIANCE PERTOL SHEAR I WANT 10,000
would u tell me how much i will get in this share, and tell how to join, and tell how to know about the sheme. pls mail me on my mail id. pls let know ur details
manish miglani said
what is today price of share of reli. petroluem
arun said
Can Any boby tell me when Reliance Petroleum will be start working…?
JV said
December 2008….
Praveen said
I appreciate the adventurous attitude of this author and his views. His predictions are actually turned to true!!! RPL 52 week high has been 120Rs…which is 100% growth when compared to the issue price 60Rs. I too invested huge money in this share.
Most people think twice to invest in stock market when sensex is touching all time high. But I was convinced with RPL because of 2 golden investment principles.
1. “Do not pay attention to sensex level but pay attention to scrip level you are entering in. “. What this tells me is RPL is much better & smart long term investment rather than RIL. Growth opportunity is huge in RPL than in RIL.
2. “Do not invest in stock but invest in its business.– Warren Buffet”
I have no hesitation to invest in Oil business. Look at the companies in US and INDIA which are having largest market capitol. Exxon Mobil Corporation and Reliance Industries. Both are in Oil business!!!
But one thing is not clear to me. I too heard that if RPL merges with RIL then it is not good for share holders. I want to know why the merge is not beneficial.
Any comments?
JV said
Thanks Praveen for your flattering remarks. I have not sold any of my holdings in RPL.
About the merger issue. I am not certain what will be the effect on the RPL shareholder, wheather they will benefit or not. I recall previous merger where in the ratio was 11 RPL(30 Rs.) for 1 RIL (330 Rs.) and I had 1000 RPL and got some 90 RIL. Thereafter , RIL rose to 1200 and then presently at 1700-1800, appreciating nearly 5-6 times from 2002, not a bad return after all
.
So, I believe there is nothing to worry in case of merger of RPL with RIL. Suppose when merger is decalred , say RPL is at 200 and RIL at 2000 (2200), the ratio remain as of previous merger. One would get 1 RIL for every 11 RPL. So in my case I am holding RPL @ 66.00 so my average price for RIL will be Rs.660-00.
Recently also again heard the humors again. However, as I have heard RPL is KSEZ Unit and therefore merger is unlikely , unless Mukesh Ambani get the laws changed
I too share your optimistic view that RPL is better in long term, people go on saying about the future price anywhere fro 300 to 600, which may come true in long term with the successful management. RPL will be the leading story of the phenomenal growth of Indian economy.
Praveen said
Thanks for quick reply JV.
Vijay said
The author of this article has a very good prevision mind. His words have proved 100 percentage. RPL present price is Rs 130. I think it May touch Rs 500-600 in 2 years. We should not forget the Reliance Group fame and Mr.Mukesh’s ability. We hope that RPL will be a very famous industry in the world. Dont forget the Mukesh’s words that “Jamnagar will be the refining hub of the world” in the next year.
Reliance Petro(RPL) : High returns « Observer said
[...] Posted on September 22, 2007 by JV Last year when I started accumulating Reliance Petro (RPL), I wrote about my expected returns. I was expecting 20 to 30% annual growth but ,pleasantly, my expectation fall short compared to the [...]
Murtuza said
Hi guys,
Everything looks good and cheap in a growing and bullish market…however, as Warren Buffet beleives, I think there should be ‘value’ investment.
RPL will see the first full year of operation results only in 2010. The expected EPS in 2010 is ~Rs.15. That is a PE of ~12 for 2010 earnings! The current PE ratio for the industry is less than 10, Exxon Mobil trades at a PE of about 12….
All this is pure speculation and NOT value investing….but it seems to be working now….but when there are corrections in the market, over valued shares will be the first to fall….My 2 cents…
JV said
@ Mutrtuza, I cannot disagree with the timeless investment philosophy of the master. I too have entered into RPL with long term, say 10 or more years, and on valuation basis. I have not sold any of my holding despite it has been doubled in less than a year.
Check my latest post about the high returns of RPL
Thanks for sharing your views.
vijay said
I want to purchase some share of Reliance Petrolium. but before this activity i want some information:-
1)Eligibilty
2)Price per share
3)What is Process and documentation?
4)what is chances in this field?
i am new in this area so please write me about total formalities
thank you
vijay sharma
JV said
@Vijay, you should consult a local broker or someone who has been dealing in equities.
Joshi said
Hi everyone. I like this forum. I have a situation and i need some advise.
My father bought shares of RPL years ago in the 90’s for bout 10Rs. He had them in paper certificates. The problem is that he has misplaced those share certificates. I want to convert these shares into electronic shares.
Can somebody/ anybody advise me on what to do about this? I just now contacted reliance petroleum and so lets see what they say. Anymore suggestions??
Thanks and keep posting
jOshi
JV said
@Joshi, it seems that the share you are taking about is of Reliance Industry (RIL), not of Reliance Petro (RPL) as RPL was not in existence back in 90’s (unless you referring to RPL of 2003).
If you have lost the paper certificate, it will be difficult to trace out the holding in the name of your father. The company registrar may not look into your inquiry merely on basis the name of the shareholder, share certificate numbers and folio numbers should be provided.
Consult local share broker proper assistance.
Joshi said
it was reliance petroleum as far as i remember. It was b4 the company was split by the brothers. I’ll ask my dad and confirm that. Thanks
Naveen said
hey friends..need your help to understand this…if some bought 100 TOCD’s of RPL in 1993, then how many shares of reliance companies one should be holding now keeping in mind merger of RPL with RIL in 2002 and then split of RIL in multiples at the time of sepetration b/w 2 brothers.
bse india said
JV got it right absolutely (although a lil conservative). I just checked RPL share price at
NSE BSE India Site and wow its way way up than what JV originally predicted. I am sure all investors (including me) are laughing their way to their DEMAT accounts!
pradeep said
sir,
i buy 500 rpl shares at price 265. now its 221. when will i get my buy price.
JV said
@Pradeep.
Looking to the recent hammering it will not be 265 at its usual speed of 5-10% everyday. But hopefully within one month you can see your purchase price. But it is strongly advised that you hold it for longer period , say 3-6 months.
kailash said
tell me reliance petro 1 yrs target
JV said
Near 750-00 in December’08.
kailash said
tell me reliance natural 1 yrs target
sudha said
thank you.
sudha said
please tell me reliance natural 1 yrs target
Abhineet Gupta said
Sir i have bought RPL shares at an average of Rs.249/- on 6th NOv. And from that date it is continously going downward. Can u tell me when it will reach at 250+ levels.Thanks in advance. I hope i will get the reply..
JV said
I request everyone to drop the “sir”. Thanks
One thing we need to understand that RPL is long term story, and I do not advise and strongly advise against most of you for short term speculative profit , unless you are very old and/or has left less than 12 month’s life (still it is good investment to leave behind
Next, RPL will definately reach to the purchase price of everyone who has purchased at higher level but that needs some time and I cannot predict exact time may be between 1-3 months. Therefore it is advisable not to invest in RPL (or any other script for that matter) with borrowed or short term money. Buy RPL when you have surplus money to park in the script.
Further, don’t expect another dream run for RPL as it has happened from 65 to 295. Such things don’t happen often, and I am thankful for that. Expectation will give you more pain. Expect modest 20% annual return from any script and because it is bull run otherwise people are happy with much lower return than 20%.
If you are struck at higher level ,particularly in RPL , you can buy at lower level which will lower the average (ofcourse again with your surplus money and not borrowed). But this is not for every script.
RPL has potential to give 200% return from current market price in the time frame of next 2 years. When I say potential, it means there is very good chances to reach the target but all other factors like global demand-supply of crude , refining margin and global economy can hurt or boost the profit of RPL.
Buy RPL in pyramid pattern. But small quantity at every price, at regular interval and accumulate a sizable bulk which will be very valuable after 5 years.
kishor Govind Tambe said
please tell me RPL & Reliance Natural 1 yrs target
Reliance Natural Resources (RNRL) : Investment ideas « Observer said
[...] on Investment in Reliance Petrole…Abhineet Gupta on Investment in Reliance Petrole…sudha on Investment in Reliance Petrole…subash on Reliance Petro(RPL) : High [...]
JV said
Friends, for RNRL discussion kindly check this post
parag shah said
Reliance Industries sale of 4% equity in Reliance Petroleum Ltd. at an average price of Rs.223 per share. These sales were made between November 10 and November 23, 2007.
Interestingly just one week prior to RIL (owned by Mukesh Ambani) selling the shares, an unknown group of people bet their shirts on a fall in Reliance Petroleum’s share price, in a magnitude never seen before in Indian stock markets.
Between November 1 and November 6, 2007, this group made short sales of 10crore shares of Reliance Petroleum in the futures segment of National Stock Exchange.
These short sales were made at prices between Rs.275 and Rs. 295 per share i.e Rs.3,000 crores approximately.
These numbers are based on official data published by NSE.
This group has made a cool profit of approx. Rs 1,000 crores in less than a month, because the Reliance Petroleum shares have now crashed from Rs.295 to Rs 195 per share!. These guys have made Rs.100 per share.
Who are these super smart traders? I’d like to meet one
Raghunath said
I have same thoughts like Parag.
What is the connection of these people with Mukesh Ambani, RIL and connected people?
And who has suffered the corresponding loss of Rs. 1000 crores? Its innocent small investors who bought Reliance Petroleum shares at the high prices, not knowing that this unholy alliance was indulging in insider trading and making illegal profits while Mukesh Ambani’s own company RIL was selling shares without disclosing this to investors!!
JV said
@Parag, Raghunath..
Well, how do I know? I am an ordinary investor
.
When people get greedy, there are always some one to take advantage of their greed, perhaps this episode is no different. But, nevertheless, people will never learn, and the media hyped because it was frontline stock from reliance group.
However, I still do not understand the logic behind entire episode and therefore give benefit of doubts to Reliance and Ambani.
Therefore, if you are investor -you dont need to panic, and if you are day-trader this is something what you want- high volatility without any fundamentals.
Another thing, as per my understandg that if RIL has sold 4% stake of RPL in 4k crores, and the proceed will go to RIL and shareholders of RIL , being the promoters of RPL, will be benefited.
It is bitter fact, that retail investors stated entering into into RPL when it was above 200 for shor term gain. I personally know many persons who have bought anywhere between 240-295, expecting 350 in no time. Such case is everyday scenerio in the stockmarket, and therefore it is difficult to sympathize with such investors.
Even, if someone is struck at 295, and has not booked loss, can wait for 1-2 years and can have reasonable profit( I am being conservative). But patient is a rare virtue.
raghunath said
I had written on this article that it is fraud and it has got published on all news paper.
Such dubious acts should be taken highly seriously and so called intelligent smart businessmen should be taken to tasks.
You can read very good article on http://www.livemint.com/2007/11/27211828/Reliance-Petro-scrip-under-Seb.html and educate all your readers about the share fraud.
raghunath said
Also all those smart investors cannot be going off like that only. They should also be done for interrogation for their tips.
Smart investors my foot http://www.financialexpress.com/news/Smart-operators-in-RPL-futures-make-a-cool-Rs-1-000-cr/244312/
JV said
@Raghunath, I agree with you, if it is fraud it has to be investiaged and if anyone is found guilty, he should be punished.
If one wants to be educated there are many resources, but majority of people never learn and get burnt in every ‘hot’ script.
Girish said
hi JV, need an info…
I had applied for RPL IPO using my friend’s demat account… since i didn’t have one.. had applied for max in retail section (around 1600 shares).. if i remember correct, approx 116 shares were allotted @ Rs 60.
The problem now is neither me nor my friend (even he doesn’t do much of trading) haven’t kept track of this. Need a brief story of RPL growth in terms of bonus shares and dividends paid.
If its too lengthy a reply pls let me know where i can get this info from.
Thanks in advance!
JV said
You can check on the comapny website http://www.reliancepetroleum.com/
Jaimala Sharma said
Would like to know that I hv purchased some 200 shares of RPL recently at @278 per unit for 1 year. Just wants to ensure that will it give me profit in the near future. This is beacuse the prices everyday is decreasing when I compare the same with my purchase price.
JV said
@Jaimala, ofcourse you have invested at high level but as your target is for one year you are assured about the decent profit. Just look at today’s trade. RPL gone zooming from 193 to 224 with turnover of 220 millions shares and made short-seller running for their monies and closed at 215.
You may also purchase additional shares at lower level which will substantially average the price, but do only if you have surplus funds and purchase in smaller quantity. Suppose you decide to add more 200 shares to average the price, purchase 50 shares at a time so you can take benefit of the price dip, if any. But be cautious and patient.
Happy investing.
PRAVEEN said
I HAVE 250 SHARES OF RPL AT 220 AND OFCOURSE I AM A LONG TERM INVESTOR AND I WANT TO KNOW WHAT WILL BE THE RANGE OF RPL WITH IN 4 YEARS APPROXIMATELY CAN I EXPECT 600 PER SHARE
JV said
@Praveen, you will get more then your expectation.
obe van kanobi said
hi,
what is your price target for rpl end march 08.
regards
Obe van
vinod said
Sir ,
I have RPL 500 Qty. at Between Rs. 190-211 , i want to invest more for long term at least 2-3 years. Should i invest more.
thanks
JV said
@Obe, it is difficult to give exact target price fundamentally. But people are expecting early announcement of production start , it it happens you can see 350 in March. Keep in mind that RPL is long term story and you might get struck if no such trigger comes during March, play safe, play long.
@Vinod, yes RPL is definate buy , as you have long term target.
AMIN KHAN said
HEY, WE WANT TO BUY SHARE HOW CAN WE BUT IT PLEASE MAIL US.
THANK U.
AMIN KHAN
Santosh said
I have heard “RIL & RPL” news and saw lot of comments on the moneycontrol website on this topic.
I am worried about the future of the RPL share prices due to such merger. Can someone throw light on this issue, like what are the possiblity of merger and what would be the benefit of such merger to RPL and RIL.
Thanks.
JV said
@Santosh, I wouldnt stop you from worrying , if you wish so. But worrying wont serve any purpose
I have expressed my view about RPL-RIL merger in this comment
Santosh said
Dear JV,
So it means there is no need to worry as RPL will give doog return in long term (9-12 months span)?
Thanks for your response.
JV said
@Santosh, yes you can have 50% return from CMP within 9-12 months.
Santosh said
Dear Boarders,
There is news in the hindu http://www.hinduonnet.com/thehindu/thscrip/print.pl?file=2007121556901800.htm&date=2007/12/15/&prd=th&
It says that RPL will invest 10-15 bn USd for aquisition in USA.
Does this mean that RPL will be merged with RIL to get so much money?
As RPL does not have so much find to sponsor such kind of aquisitions. Any idea where will RPL get such huge amount of funds?
I would appreciate different views of the boarders.
Thanks.
JV said
If RPL is merged with RIL, there will be no existence of RPL. So if RPL is talking of acquiring something, it shows that RPL will be alive and kicking, so dont worry about that , it is good sign.
Perhaps, funding is no problem for Reliance group. Could be loan from RIL, long term debt against equities (as the share price is quite high), or can issue rights (but that will dilute equity even more).
The article also says that “On the other hand, it is exploring ways and means to directly sell petroleum products in the U.S. and Europe”, there where Chevron comes into picture. Read this article about Why Reliance needs Chevron. I ,therefore, also do not share the apprehension of many people that Chevorn may exit RPL
THATIVIJAYBHASKAR said
i had buy rpl at 280 should i sell or hold.pls tell me what is the target of this scrip for this month end.
JV said
@Vijay Bhaskar, it is tough decision. If you sell now you would book significant loss around 30%. If you can remain invested without much worrying about the money blocked in the script you can hold for long term.
However, I cannot and do not want to project any target of month’s end because all price targets will be speculative. There are many rumors are floating around about early start of RPL refinery, about RIL-RPL merger, about exit of Chevron and none of them are confirmed yet.
THATIVIJAYBHASKAR said
i am getting fustration what i do with this rpl.i am doing trading from 1 year never happend like this.half of the money blocked in this scrip.pls tell me any website through which i can contact with management.may be i will get some information a bout company rether than rumours
PRAVEEN.A.P.NAIR said
MR.VIJAYBHASKAR “NO PAIN NO GAIN” IF U DONT HAVE THAT MUCH PATIENCE TO HOLD ON THEN NEVER GO FOR TRADING,DEPOSIT IT IN A BANK GET INTREST THATS ALL (IF U R GETTING FRUSTRATED BEING INVESTED IN THIS MARVELOUS SCRIP HOW CAN U INVEST IN OHTERS)
Rohit said
Wat should be the target price of Reliance Petroleum by 2008 dec..
How should i trade it at Rs. 230. Thanks in Adance
Firadh said
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I have acess to hard copies
My mail id is firadh@gmail.com
DO reply back
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Bilal said
i have bought 1000 shares of rel petro @ 241.50 where u c rel petro 2 years down the line i believe in long term investment can any1 answer my question this is the 1st time i have invested
JV said
@Bilal, an investor should ask such questions first, and invest after getting the satisfactory answers.Check this question and answer about investing in oil and refinery industry
However, you are already invested , remain invested for long. I am not giving any target as I had targeted for 300 by 2009 which has been touched already.
But, if someone wish to speculate about the price there is some room for speculation.
If RPL earns net profit of Rs.4,500-00 Crore in the first year of its production, , will make EPS of Rs.10-00 and considering PE of 30 (of Reliance Industry) price of RPL about 300-00 would be fair one.
However, if RPL runs at its full capacity , 27 million tonnes per annum (which is 150% more than RIL) and no taxes to pay, proifts could be much more than expected. But I am not raising expectation high, just stay invested.
Sajeev said
JV…
Im just planning to get abt 500 shares of RPL… So was surfing all round the park for as much as info as possible
… and im planning this as my retirement fund 
…
Its fluctuating big time today…waiting the price to be around the 200 mark…
Hope things go well…
Gr8 Blog…keep up the good work..cheers
vishal said
got news that r com will reach upto 900 in 4 to 5 days can i invest in that…..jv
JV said
@ Vishal, only if you want ‘invest’. Do not buy for trading purpose.
Dan said
Hi JV,
I am an IT Consultant and have been travelling abroad and never really kept in touch with things Reliance. I have also missed most of the Company communication sent by post to my Mumbai address since 2002.
I had about 300 shares of Reliance Petrochemicals Ltd issued around 1992 to me as part of Convertible Debentures.
Then I had Reliance Petroleum Ltd shares allotted to me as follow..
100 in 1999, 100 in 2000, and 100 in 2001 as part of 100 Triple Option Debentures (TOCD) that were allotted to me in 1993. I also have 2 certificates of 100 shares each allotted in 1993 and 1995. (How? I am not sure..!!) All in all about 500 RPL shares.
However, I was surprised to learn that RPL was incorporated only in 2005.
Pls explain to me :
1)what happend to Reliance Petrochemicals Ltd?
2)Is Reliance Petroleum today is different than the Reliance Petroleum Ltd which issued TOCD in 1993? If so what happens to my 500 RPL shares?
Thanks
Dan
Santosh said
Dear San,
It seems you are old timer! Reliance petroleum was merged into Reliance Industries in 2001 with a ratio or 11:1 (1 RIL share for every 11 shares of RPL).
Later, in 2006, RIL floated another company with the same (OLD)name – Reliance Petroleum Limited.
Thanks.
JV said
@Dan, as stated by Santosh, old RPL has been merged with its parent RIL. You will have to correspond with RIL to know the details of the allotted shares of RIL.
Dan said
Hi santosh/JV,
Thanks for your feedback..
Looks like I am really out of this world!!
Please let me know what happened to Reliance Petrochemical Ltd..
Thanks
Dan
karthik said
And what about the dividend??
karthik said
Hey what about the dividend of so many years..
pls explain how do you calculate the total dividend that Dan gets..
because mine is also a similar case…
Karthik
naresh said
iam investing in share market for the first time…can i buy rpl now for future investment as its price is way below 200…..is it a safe bet….plz advice
JV said
@Naresh, DO NOT enter into the market , especially when it is at the peak of historical volatility, if you have no experience. Consult professional portfolio manager/broker.
However, talking about RPL, it is good stock in LONG TERM. Please understand this. Because, most of investors (it is difficult to call them investor) enters into liquid stocks like RPL , RNRL etc., for quick bucks , expecting 30-50 % gain in week or fortnight at the most. So, if you have long term horizon , say about 3-5 years then RPL is good buy. But do not purchase merely because it has fallen from its recent highs.
Jasleen said
Hi JV,
I bought RPL in Jan and my avg price was Rs.218. I had invested for long term and therefore when the markets fell and RPL touched a low of Rs 106 I didnt panic. I rather purchased a few more shares to improve my avg price to Rs 190. Can you help me understand would this volatility and the expected recesion in US (which might linger on for 8-9 months) have a significant impact on the long term price of RPL? Or is the oil industry (downstream and upstream) somewhat shielded from the market fluctuations due to ever rising demand of Crude oil and its products (Crude oil price did take a big hit though). Thanks for the help
JV said
@Jasleen. Its good to hear that you did not panic, and infact bought some more.
One thing I need to tell you that I am no expert of share market, just an investment avenue and I sought professional paid services of experts whenever necessary. So, whatever I discuss anywhere on the blog is just my views not necessarily to be relied upon.
Nor I am expert on economy, and experts all over the world are confused and worried about US economy and slowdown. I am unable gauge the impact of US recession/slowdown on RPL.
Another thing, RPL is crude refinery and will do job work , of processing raw crude. You might want to understand more about oil and refinery industry, check this question and answer about investing in oil and refinery industry
KAILASH said
tell me 6 month target of reliance power
Rahul said
Hi,
I was badly hit by the fall …i took exit from everthing..and just holding on RPL bought at Rs.225 with view long term 3-5 years…but merger with ril ….is it worth holding on with RPL & what kindi of price target do you see in 3 years?
PRAVIN said
Dear Rahul,
You have hold very good stock but at quite expensive. Don’t worry you will get decent return within 3 years. I am expecting at least 600+ during 3 years.As this co. has no taxes because it is in SEZ zone. So they will book huge Profit, in comparision of others in the same sector. Only news of Starting Production will Doubled it.
raj said
hi jv ,
im new to this thread , i find this an interesting discussion sharing knowledge to one another . can i buy RPL at this current level for a 5-10 yr time frame. will i be getting bonuses and addditional shares in due course of time.
JV said
RPL is good buy with longer time frame. If RPL will not have any expansion plans (assuming that all expansions are done by the parent company RIL) RPL will be cash-rich company in few years, then most cash reserve will be diverted to RIL by the way of dividend.
raj said
hi jv
what do u mean by this , wont we get any dividends for rpl ?
JV said
I meant that shareholders ,individuals and promoters, of RPL will get good dividend.
Manoj Sharma said
hi….
i was just going through all the talks about RPL’s future. but still have one question to ask.? with many of reliance petroleum petrol pumps shutting down what will be the future lies ahead if i invest in this scrip for 2 years.
i have 200 shares of RPL bought at an average rate of 207, currently its trading at 171. should i keep the scrip or sell it off.
JV said
Petrol pump business belongs to RIL, the parent company of RPL, so there is nothing to worry about RPL share holders.
Even if we consider from RIL view of point, it was good decision after all. The government is artificially controlling petrol/diesel rates and provides subsidy to PSU oil companies to compensate their lossess, but private companies had to increase price but then they could not compete with PSU companies. Following RIL, Essar has also announced closing of its petrol pumps.
Yogesh said
Hi ,
I m a Long Term Investor 2/3 Years , I m holding 2300 Shares of RPL at the avrage price of Rs 180 , Can me tell anybody what could be the Target price for RPL for Next 2 Years , also i m planning to buy more shares should i buy RPL or look for some another script – Kindly advise
Yogesh – Pune
Yogesh said
I m a Long Term Investor 2/3 Years , I m holding 2300 Shares of RPL at the avrage price of Rs 180 , Can tell me anybody what could be the Target price for RPL for Next 2 Years , also i m planning to buy more shares should i buy RPL or look for some another script – Kindly advise
Yogesh – Pune
JV said
It is good to be long on RPL. With available figures one can make approximate calculation of RPL’s earning as under :
=====
5,80,000 (barrels per day)
x 15 USD margin per barrel
= 87,00,000 USD perday
x 365 days
= 3175500000 USD per annum
x 40 Rs.
= Approximate 12k crores Rs.
\450 crores shares
=about Rs.26 EPS x PE of 20 = 520-00
=====
If RPL is fully functional for a year abovesaid estimate will bring the share price near 500 in 2010.
Assumed refining margin of 15 USD is of RIL , RPL may have higher margin considering tax benefits.
http://sify.com/finance/fullstory.php?id=14590304
http://en.wikipedia.org/wiki/Reliance_Petroleum
You should not put all eggs in one basket, you should invest in different shares in different sectors.
Lastly, Yogesh, you have been investing large amount in equity which is apparent, you are advised to consult/subscribe professional advisor like equitymaster.com
MD said
JV,
interesting stats, however have to conisder the odds, what I mean is replacement for OIL, nothing big is going right now, however I have heard some aggressive moves to replace oil. Thanks to Bush for encouraging Iraq to keep destroying resources.
Above is my pessimistic view, however there a great potential RPL has, the reason is Mukeshbhai is bringing a revolution in the way how Petrol is produced out of Oil, with all the new technology they can produce more Petrol from the same amount of OIL, my point is before there use to be 35% wastage which can now be turned down to 10%, which however will not reduce the price but just the quantity.
MD
JV said
I cannot disagree on the point of future discovery on substitute of OIL.
But here what we calculated is short term view, say five years, considering the invention/discovery of new breed of fuel-getting it recognised – adoption of such fuel on large scale in globe over by replacing all machineries/vehicles etc., which would easily take a decade that is TOO after such a fuel is discovered.
Mukeshbhai mus have considered all these odds.
sreenivasan said
iam holding some RPL shares, with the current market trend i.e closing of reliance petrol bunks is it advisable for me to hold the shares or sell all the RPL shares kindly advise
Jay said
Hi JV, I recently invested in RPL at diff levels averaging @173 (total of 5000 shares). I still have about 50 lakh rupees and considering investing in real estate or something else. Do you think it’s a good idea to put this money in RPL (I know you would say don’t put your eggs in one basket). I can afford to take risk considering the fact that my investment is long term (say 5 yrs) and RPL is a good stock which suits my needs rather than putting my money in real estate which is risky now a days? Please advise..
JV said
@Sree, hold RPL if you can.
@Jay, you must be kindding
!! You want to invest 50 Lacs, you should better consult professional portfolio adviser.
However, RPL remains good in long term. You should think twice before leaping with that much fund.
lyrics said
lyrics…
As for me the comment last month (I could not find the link now) is like my comment now that some comments are like this comment… Who advice?…
NISHANT said
I hav 500 shares of rpl . From the year 1994 but i dont hav any knowledge in shares. Pls let me know how it ‘ll help me 2 get income . U can ma.il at nshnt.singh2@gmail.com
Nishi.02 said
Anyone who can help,
My father purchased Reliance Petrochemical Shares and Debentures in the late 80’s from what I understand… I have read all parts of thread concerning the shares, however what has happened to the debenture end of it. Any value? Should I De-mat them?
Om said
Hi JV
You have done a lot of useful study.one can extrapolate from note 89; however wd request you to put up yearwise conservative/fair and bulllish/bearish estimate from dec 2008 or mar/apr 2009. Thanks fo the good work.
Om
JV said
Om, it is difficult to give year wise target, as the company has not come into production and therefore there is not actual data to work on. Whatever discussed above is largely guess work on my side by making calculations based on the assumed capacity of RPL and actual data of RIL.
However, there can be more pleasant surprises than what we, individual investors have in mind, with limited datas. We are still considering only crude processing, but crude by-products will also have share of profits and with having 8000 acres of SEZ, one can expect establishments of other ancillary industries either owned by Reliance or in JV with other companies.
manju said
Dear Sir, I am really new to Share, I am NRI, I can take loan @8% interest rate from Bank. Any one suggests me to go for this RPL for span of 5years at this level to make 200% returns. Is it realistic? Please do write manju_berlin@yahoo.de
I am looking for Child plans Thank you in Advance.
JV said
Manju, you are making funny comment, arent you? DO NOT ever invest with borrowed money.
Hitesh said
JV,
In your respsonse number 89, you have considered $15 refinery margin per barrel. With the rising crude oil price ( currently at $130 at Nymex and rising), I expect these margins to go down. I am looking for an index which tracks refinery margin which tracks the crude oil price. If I get one I will repost here.
S S Cheema said
RPL? it is poised to give good returns. I am toning down my comments but i am sure that it will give good returns for two reasons that i see;-
Firstly the pedigree. — they have to prove themselves as a family or after this power debacle the ratings will go down.
Secondly, this side of suez canal there is virtually no other refinery that is able to process a lower quality of crude into light sweat oils. The demand for such oils is just going through the roof. Earlier it was only US and europe and now with more stringent pollution norms — it is a basic need for all.
Short term chart too is not bearish.
Cheema
manju said
Tell me is good level to enter? one one year span?
JV said
Yes you can enter into RPL. But with caution. DO not buy all in one shot, buy in small quantities so you can have advantage of lower price.
Himanshu Patel said
Dear JV
I have RPL & 207 with average rate 80.15
In this December it’s refinery will be started in full flagged.
what you expect it’s price at Dec 2008 & April 2009.
and should i invest more in this at this level?
Himanshu Patel
contacttohimanshu@yahoo.com
JV said
Himanshu, as I am also having RPL at average of 65+ , I have also started accumulating some more RPL at this level , which will allow me to book part profit in future and still have my original bulk. So, you can invest some more as we have benefits of low average and deep stop loss. But dont over do.
Himanshu Patel said
Thanks,
I have purchased more 63 units @175.5 Now i have total 207 with average rate 178. I am planning to invest more 30K-40K into RPL , not at single time but at every down below the 178, may be for next 3-4 month.
I needed that money by Dec’08 or maximum April’09 i can manage, so please let me know that can I expect 40%-50% return from this level to Dec’08 or April’09.
Himanshu Patel said
Thanks,
I have purchased more 63 units @175.5 Now i have total 270 Units with average rate 178. I am planning to invest more 30K-40K into RPL , not at single time but at every down below the 178, may be for next 3-4 month.
I needed that money by Dec’08 or maximum April’09 i can manage, so please let me know that can I expect 40%-50% return from this level to Dec’08 or April’09.
Himanshu Patel said
Thanks,
I have purchased more 63 units @175.5, Now i have total 270 Units with average rate 178. I am planning to invest more 30K-40K into RPL , not at single time but at every down below the 178, may be for next 3-4 month.
I needed that money by Dec’08 or maximum up to April’09 i can manage, so please let me know that can I expect 40%-50% return from this level to Dec’08 or April’09.
JV said
Your average seems higher , almost to the present market price. Do not expect return of 40-50% , that will hurt you. 20% return in 12 months would be reasonable one, as you have restricted time frame. Be cautious in market, as it is getting more volatile everyday.
mr petrol said
Whats the news with Reliance Petroleum purchasing Mobil Australias business???
Veejay said
hi JV,
what about reliance power stocks? is it a good buy? thanks.
JV said
No, I would not buy Reliance Power. Fundamentally, RPL is still much better choice.
SAMKIT said
please tell me in how much period rpl share touch 300
JV said
12-18 months!!
sujith said
Hai JV,
is it true that Windfall tax will affect RPL Profits.
PRAVIN said
Dear JV,
Pls. suggest can I bye RPL at this Level for 2 years time frame? RPL’s Commercial Production will start in 2/3 months, will I get adventage of this News? I think RPL will Zoom atleast 30 to 40 % from current level. What is your opinion? Pls. personnely mail your view to my mail ID as below
http://www.pravin_patil762001@yahoo.com
Thnaks N Regards
JV said
RPL is good investment for 2 years time frame. No, you will not get any benefit for that news, as it is very well known fact and already has been discounted by the market. 30-40 % in two years is very much possible.
NKG said
vary good and safe investment for long term
mohan raj said
i need to clarify some doubts about my fathers share, incase of name transfer to my account.
i need ur email address for some clarification.
so mail me ur address.
Murthy said
Hi,
This is murthy over here.I have purchased rpl share at the rate of 124 rs per share that is on 2007. total no of share i have is 500. i just want to know can i conitnue those share for a long term.And i also want to know is the company have started for rpl.and if i keep the share till december. what profit can i book. please email to me.
Thanks,
Murthy
dilip said
Himanshu,
This is a good time to buy at “89″….
JV said
lol,
Ajay said
To all the guys who had purchased shares @150+ Rs. The share value of RPL as of today is 91.10. Big Loss!. But hold on to the shares it might come up in the next few months when RPL actually begins its operations.
zeeshan said
when the production is going to start.
Ronak said
Hi JV,
I am planning to invest around 1-2 Lakh Rs to buy RPL shares. At the current rate @83, do you think I should go ahead and buy somm shares? like 500-700? or should I wait for sometime to lower the rate? i.e. at around 70-75? I am looking to invest with the time span of 3-5 Years. Your advice would be greatly appreciated.
Mayur said
Reliance is in deep trouble.They have been notorious in their ways and their roots are in corrupting the systems and sabotaging this country.The father was a master scamster and the sons are no less.but this time it will be very tough for them.Especially Mukesh.Reliance claims to have 90,000 crores but their dividend payout ratio has been constantly falling.Do they really have that money?I doubt it.Besides,their retail venture was a big flop.They got into deep water drilling in kg6 without any experience.None of the international companies bid for any of the NELP license.Deep water drilling is a very specialised field.Only the top companies with years of experience can do it.It is that risky.I remember that they have been constantly delaying the start date of oil to flow from kg basin.A little while back they had opened their data centre for foreign companies,literally begging them to become a part of the drilling.None came.Now chevron wants to cut and run.They are selling their 5% stake.mukesh ambani is upto his neck in this one.He is desperate for funds.Which oil refining or drilling company is into selling milk and vegetables I wonder?Or was it just a way to siphon off funds?And since we are on reliance,remember that ICICI is also in the same boat.It is a well kept secret that ICICI is owned by the black money of indian politicians.If you think that Temasek holdings is a legitimate shareholder,be aware that singapore govt is almost a dictatorship and is well known to be a source for washing black money of the worlds corrupt leaders.If it was owned by XYZ company of Switzerland or cayman islands it would arouse suspicion.Thats why the temasek holdings route.Dont ask me how i know….just be aware.
Best of luck
Mayur said
And now you have the news that the Govt withdrew $20 billion from ONGC without informing the minority share holders makes me laugh.What a joke!!If goldman does a review of all the Nifty companies accounts the sensex will come down to 4000.The so called foreign investors have realised that this country is nothing but a banana republic.All talk and no substance.Totally corrupt.Substandard and decaying.If Raju robbed money from Satyam and put it in Maytas to buy property why isnt the govt seizing the properties?Answer–Because the politicians have a major stake in those properties.This whole emerging giant talk just makes me laugh and the foreigners blow their money here.
What a sham!!
Mayur said
And now that the festival of Holi is upon us…it just takes me back a few years when the budget was to be presented after the festival.Engrossed in festivities,a news guy asked Yashwant sinha (then finance minister) about the budget…and…he gave the most candid reply ever in the history of this country….He said..and I quote…”The budget is a joke”.
You dont believe me?Go ahead put your money and your ass on the line.Welcome to the sink called India.
Mayur said
The Nexus of Corruption: Reliance and Government
‘A government, for protecting business only, is but a carcass, and soon falls by its own corruption and decay.’ – Amos Bronson Alcott, American Educator.
One of the common myths circulated in Indian mainstream media is about the inherent dynamism of the Private sector, which offers a refreshing contrast to the venal, corrupt and mendacious class of politicians and government officials. The Captains of Industries are sympathetically portrayed as dynamic, hard working and enterprising people who are thwarted by soul stifling regulation imposed by the Government. Unlike the moribund Public Sector, say the business friendly media, the Private Sector is efficient and creates a big pie in the economy. But unfortunately, like all myths, it has elements of truth but deceives us by not presenting the whole picture.
While there appears to be no dearth of books praising the virtues of Business Magnates, there are few books documenting the corrupt nexus between Big Business and Big Government. One of the most remarkable books to emerge in the Indian publishing scene in recent times is Reliance- The Real Natwar written by Arun K. Agrawal. This book is an unflattering study of the behemoth Reliance Group and its alleged loot of public money with the connivance of politicians and bureaucrats in the government.
The spotlight of the book is on the alleged involvement of Reliance Petroleum Limited (RPL) in the Iraq oil-for-food scam. As the author says in his book,
‘This book has its origin, in the compulsion, born of exasperation, experienced by the author to record the failure- or, more accurately, the self-serving refusal – of the Indian political and administrative system to investigate the award of extremely lucrative oil contracts under the United Nations- administered Oil- for-Food programme in Iraq to RPL in transactions manifestly driven by kickbacks/ bribery and bipartisan political patronage.’
Mr Agrawal, a lawyer and activist, has impressive credentials to his credit having exposed corporate-government scams in the past. He filed a PIL against the 1000MW Cogentrix Power Project in Karnataka alleging that the company with a capital of only forty lakh was awarded the power project by the government of Karnataka without any competitive bidding. When the game was up Cogentrix abandoned the project, which had inflated capital costs, saving the Indian public crores of Rupees. He was also instrumental in preventing the transfer of the highly profitable Alamatti Power Project in Karnataka to the Private sector, which was built with public money. As a consultant to Prasar Bharati, he unearthed the cricket telecast scam which saved twenty crores for Prasar Bharati. Justifiably, the author concentrates his ire on government policies, which bills costs to the public while the profits are pocketed by the private sector.
The Oil-for-Food scam
The lingering public memory of this scam as a political fallout of the Volcker Report involving Mr Natwar Singh, his son Jagat Singh, family friend Andaleeb Sehgal, Asad Khan (son of Congress politician) and the Andaleeb-owned Hamdaan Exports Limited is a distorted picture which is complicated by the alleged involvement of the Congress Party named as non-contractual beneficiary in the Volcker Report. But the prime beneficiary of the scam was Reliance Petroleum Industry, which got off scot-free without any investigation whatsoever.
Perhaps it would be necessary to have an historical perspective on the Oil for Food scam to understand the full ramification of the scam. The story begins with the military misadventure of Saddam Hussein in Kuwait. Even though a cease-fire was agreed by Iraq in February 1991, after her expulsion from Kuwait, the Security Council kept in place one of the cruelest sanctions, which caused untold hardship to the Iraqi people. As the International public opinion mounted against the UN sanctions, the UN Security Council decided to lessen the hardship of the sanction by establishing Food for oil programme in 1995 under resolution no. 986 as a temporary measure to provide for the humanitarian needs of the Iraqi people.
The Oil for Food programme allowed Iraq to export oil to parties registered with UN and the use of the proceeds of oil sale by UN to pay for the food and medicines imported by Iraq, after deducting reparation, war compensation and commission. The programme started from 1996 and completed 13 phases until Saddam was toppled in 2003.
However the Oil for Food programme became a hotbed of corruption involving many highly placed UN officials who turned a blind eye to the irregularities of the programme, which led to the skimming off huge sums of money to the relatives of UN officials, Iraqi officials and oil companies all over the world.
The opportunity of corruption lay in the fact that the Iraqi Oil was sold at a price less than international rates. The difference in pricing of amounts actually paid to UN and the prevailing international price of oil was split between Iraqi officials (bribes/ surcharge), political allottees (commission) and the balance of profits to the traders and financiers.
The lid was blown off the scam when a Committee was appointed to go into the murky dealing of the UN programme. This Committee was headed by Paul Volcker who was former Chairman of Federal Reserve (US). The report of the Committee opened the Pandora’s box as Table III of the report identified three non-contractual beneficiaries, which had paid bribes/ surcharge to the Iraqi officials. The fourth beneficiary Mr Bhim Singh was absolved, as he did not lift even a single barrel of oil. In the report the Natwar–Congress combine lifted 2.93 million barrels, while Reliance lifted 15.78 million barrels for which it paid a bribe of US$3.57 million. 1
The patsy
Making scapegoats of lesser criminals is a national pastime while bigger fish go scot-free. In fierce parliamentary debates that followed the disclosure, there were fingers pointed at Sonia Gandhi who had just recovered from the whiff of cordite fumes of Bofors Guns. The BJP targeted the Congress Party for paying bribes and demanded its resignation. Other members asked for a through probe and made impassioned speeches for the punishment of the guilty. As the top leaders of the Congress Party felt jittery a plot was hatched to make a scapegoat of Mr Natwar Singh who was a Minister for External Affairs. In a damage control operation the Congress party appointed Mr R.S. Pathak, an eminent jurist, who served as the Chief Justice of India and also as a judge in the International Court of Justice at The Hague to institute an enquiry into the Oil for Food programme. The terms of reference of the R.S Pathak Inquiry Authority was restricted to two non-contractual beneficiaries, namely, the Congress Party and Mr Natwar Singh. The significant omission was Reliance Petroleum Limited, which was the largest beneficiary of Oil for Food scam.
Mr Natwar Singh whose wrongdoing was minor when compared to Reliance Petroleum Limited was sacrificed on the altar of expediency, as he was not a fundraiser for the Congress party unlike the Reliance Group, which had friends in high places. The commission of 70 lakhs of rupees made by Andaleeb Sehgal certainly involved Natwar Singh who could be accused of using his political connections to favour his son and his crony Andy by providing letters of introduction to the Iraqi authorities. The paltry gain for which Natwar Singh damaged his political future astounded political observers in Delhi. The fact that Natwar Singh was not given the option of disowning his son and leaving political life in blaze of glory sent tongues wagging in political circles. This was indeed strange given the fact that no part of the commission did end up in the personal bank accounts of Natwar Singh. Apparently it was necessary for the powers in the Congress Party to make an example of Natwar Singh and squelch the scandal. Predictably, the Inquiry fixed the blame on Natwar Singh and he was forced to resign.
Parliamentary cover up
In the speeches made by Members of Parliament, the name of Reliance Petroleum Limited never figured in the controversy. If it was mentioned in passing that could be attributed to Mr Sitaram Yechury who to his credit raised the involvement of Reliance in the Oil for Food scam. But even the left party flattered to deceive. At a press conference Prakash Karat of the Left did mention the role of Reliance in the bribery scandal, but there were no coordinated efforts on the part of the Left to bring Reliance within the purview of the Inquiry Commission. There were also reports suggesting that Mukesh Ambani met with the Left leaders but what transpired between them is a matter of conjecture.
All the speeches of the house were directed against the Congress party and Natwar Singh but Reliance Petroleum was spared the attention. A careful transcript of the speeches made at the floor of the Parliament reveals this fact. The Finance Minister, PC Chidambaram carefully avoided any reference to Reliance Petroleum Limited and blew smoke rings. The performance of the seasoned lawyer Kapil Sibal was masterly in suppressing critical facts about the involvement of Reliance in the scam. The BJP also adroitly sidestepped the Reliance issue and harmlessly indulged in verbal pyrotechnics. There was a strange unity among political parties to protect Reliance Petroleum from legal proceedings.2
Tip of the iceberg
The Oil for Food scam was not an isolated instance of Reliance Petroleum Limited walking away from corruption unscathed. There are also other scandals involving the Reliance Group. One of which was the deal involving Panna-Mukta- oil fields – given to Reliance during the Congress government by Captain Satish Sharma who was the Minister of oil and Natural Gas and a close friend of Rajiv Gandhi. The deal was sweetened to benefit Reliance on the specious plea that ONGC’s cost of exploration was inefficient when compared to the exploration costs of the private sector. Further, the royalty payment was on the basis of fixed rate instead of ad valorem rates, which would be beneficial to the government. This is evident as oil is a non-renewable asset and subject to upward revision of prices. The loss to the national exchequer was to the tune of thirty billion US dollars if the price of the barrel is fixed at US$80 with reserves at around 120 MMT. If the additional gas reserves of 1.9 trillion cubic are calculated then there is another staggering loss of about another 10 billion dollars.
The Comptroller and Auditor General adversely commented on the decision, saying no in depth analysis was carried out by the Ministry to arrive at such conclusions. Satish Sharma was later subject to a CBI probe, which said that there was a prima facie case indicating assets disproportionate to known sources of income
For future deals such as KG basin the Royalty payments were changed from fixed rate to ad valorem rates of 5% to 10% of sale realisation. As a result of absurdly low rates of royalty charged the government lost heavy revenues to the tune of over one hundred billion dollars, which was handed on a platter to Reliance as windfall profits.
Other controversies have dogged Reliance such as jacking up capital costs from $1.5 billion (2002) to $8.4 billion in 2006 with respect to the Krishna- Godavari project. The amount represented a massive scam, as gold plating of costs would be recovered before sharing of any production with the government.
The Reliance Group has also shown ingenuity in alleged tax evasion of customs duty of 120 crores in its illegal import of machinery for its PTA plant. The matter has been pending in the courts for over twenty years and has not seen the light of the day.
As the author sums up, the secret of Reliance Group becoming the largest conglomerate in the country could be attributed to, ‘financial engineering, propping up of its own shares, issuing shares of new companies at premium to the public and then merging the companies and, of course, the oil bonanza handed over to it by the government.’3
A dangerous collusion
When the interests of Big business coincide with the personal interests of politicians and bureaucrats of the government, then it can be safely assumed that public good or national interest would be in an irreversible terminal decline. As Timothy P. Carney in his book The Big Rip-off: How Big Business and Big Government Steal Your Money says, ‘Today’s largest corporations have mastered the art of working with government officials at every level to stifle market competition. They reap billions through a complex web of higher taxes, stricter regulations, and shameless government handouts.’
He adds ominously that when the players in big business and big government unite, the end result is one of consumer misfortune, where prices are artificially inflated, fewer substitutes are available for sale and there are huge barriers to market entry for small businesses entrepreneurs signifying the death of free competitive markets.4
Apart from creating a stifling monopoly, which destroys competition, the coffers of the state dry up when it hands out national resources for a song and forgoes opportunity to collect revenues. When the state is not able to fulfill its constitutional obligation on account of paucity of resources, it loses its legitimacy in the eyes of the people and becomes inherently unstable.
The important achievement of Arun Agrawal’s book, Reliance – The Real Natwar is to show that it is bad economic policy to substitute the invisible hand of the market with the greased palm of corruption. For this reason alone this book should be read and reread without the ideological blinkers in our mind.
Mayur said
And today there was a news flash that Reliance will not supply the gas required for the Dhabol power plant as it will instead use it for their captive power plants….the buzz is getting louder and as i had stated earlier….Reliance has not found the gas in kg 6 basin as they have claimed.Deep sea drilling is a highly specialised job.Only companies with years of experience can do it.A little while back Reliance had opened their geological data centre for foreign firms…literally begging them to come and help them…instead..chevron sold its stake and bailed out.Reliance is in a deep spot.They claim to have cash reserves of 80 thousand crores but have raised 28 thousand crores from the market.Something really strange is going on.Not surprising.Stay tuned.
sri kanth said
DEAR SIR,
REILANCE PETROL SHEAR I WANT 100 (HUNDRED).