New Delhi/Mumbai: Mukesh Ambani's Reliance Industries Ltd., India's most valuable company, was ordered to sell natural gas to a company owned by his younger brother Anil for 44 per cent less than the government-set price, lawyers said.
The Bombay High Court yesterday ruled the company must honour a 2005 agreement to supply 28 million cubic metres of gas a day at $2.34 per million British thermal units (Btu) for 17 years, Mukul Rohatgi, counsel for Anil Ambani's Reliance Natural Resources Ltd., said.
Reliance Industries spokesman Tushar Pania and counsel Atul Dayal didn't take calls.
Reliance Industries fell the most in five months, while Anil Ambani's company jumped as much as 27 per cent after the ruling on the dispute sparked by the splitting of the family empire in 2005.
The court had temporarily lifted a ban in January on gas sales from the energy explorer's largest field, paving the way for supplies to fuel-starved fertiliser and power companies.
"The Reliance Industries share price has factored in a gas price of $4.20," per BTU said, Vinay Nair, an analyst with Khandwala Securities Ltd in Mumbai.
Much of the company's "future earnings depend on gas sales from the Krishna-Godavari basin".
Reliance Industries fell 7.9 per cent to Rs2,176.75 (Dh166.786) at 2.48pm yesterday in Mumbai, poised for its biggest decline since January 7. The stock has climbed 77 per cent this year compared with the 58 per cent gain in the benchmark Sensitive Index.
Reliance Natural rose 26 per cent to Rs110.2 (Dh8.44), the highest since May 22, 2008, and has surged 99 per cent this year.
The companies are required to reach an agreement based on the terms of the memorandum of understanding signed in June 2005, according to Reliance Natural's lawyers.
The Bombay High Court said "the two companies should negotiate a new agreement within a month, with price, quantity and tenure as a must," D.J. Kakalia, one of the lawyers for Reliance Natural, said at the courthouse. "These three parameters, as per the existing MOU, must be in the new agreement."
Reliance Natural procures fuel for the Anil Dhurubhai Ambani Group's power projects.
Reliance Infrastructure Ltd operates six power plants in India and plans to build another seven, according to data compiled by Bloomberg, while Reliance Power Ltd is building at least three large stations.
Shares of Reliance power rose 3.7 per cent to Rs199.5 (Dh15.29) while Reliance Infrastructure gained 2.6 per cent to Rs1,211 (Dh92.82)
Reliance Industries had signed gas sale contracts with fertiliser makers and power producers before it began producing gas from the KG-D6 field in the Bay of Bengal on April 2. The court had in a verdict in June last year restrained the company from selling gas to companies other than Reliance Natural and state-owned NTPC Ltd customers that had signed contracts for the fuel. NTPC rose as much as 5.2 per cent to Rs228 (Dh17.47) in Mumbai after the report of the verdict.
Deepna Mehta, a spokesperson for the state-owned company, declined to comment. "The verdict wouldn't necessarily mean the case will be resolved as the parties may even appeal in a higher court," Khandwala's Nair said.
