Angel Broking has carried out an excellent analysis on RNRL‘s Business Model.
This is the First Part of a Two Post Series.
RNRL’s main business is likely to be sourcing gas from RIL and supplying the same to the group’s gas-based power generation projects. That apart, the RNRL-led Consortium has also won 4 blocks under CBM-III and is the second largest player in terms of CBM acreage in India. Currently, RNRL is engaged in coal supply for which it has entered into freight contracts for transportation of coal from Korba to the Dahanu Thermal power station.
Pending the outcome, Angel Broking has carried out a scenario analysis to gauge the likely impact of the outcome of the legal tussle on RNRL’s stock price.
Scenario I – RNRL loses the court case
In the event of an unfavourable ruling, we believe the stock will correct and touch lows of Rs20/share, a steep correction of around 76% from current levels. At these levels, the stock will trade at a slight discount to its book value as RNRL derives Profits from Other Income and has no other concrete asset apart from the GSMA. Hence, if the court ruling fails to favour RNRL, the stock is likely to slip below its book value.
In the next post we shall see what happens if RNRL Wins the Court Case against RIL.