New Delhi: Reliance Industries Ltd (RIL) can potentially become a USD 100 billion company by 2017 from its current market capitalisation (m-cap) of less than USD 47 billion, Goldman Sachs said in a report on Thursday.

For its m-cap to more than double, RIL needs government nod for nearly doubling of its gas price of USD 8 per million British thermal unit together with approvals for oil and gas field investments and completion of petrochemical expansions, Goldman said in its report 'Core capex to lift returns, rerate stock; roadmap to USD 100 billion market cap'.

The roadmap for USD 100 billion mark includes RIL "restricting overseas inorganic growth to core business segments only and maintaining focus on synergies and returns," it said.

"We believe RIL's medium to long-term growth potential is not being reflected by the market due to its focus on nearer-term concerns over growth, returns and cyclical weakness," Goldman said.

"Current share price is giving little credit to management for refocusing investment in core activities and its potential impact on cash returns, in our view," it added.

Shares of RIL, which has recently been affected by the declining output at its flagship KG-D6 fields where production has dipped less than halved to 29 million standard cubic meters per day, gained 2.04 percent to close at Rs 815.05 on the BSE.

Goldman valued RIL's oil and gas exploration and production (E&P) business at USD 14 billion, shale gas venture at USD 8 billion, refining at USD 19 billion, chemicals at USD 24 billion, cash and treasury at USD 18 billion, and telecom and retail business at USD 6 billion each.

It said natural gas price hike announcement by the government will bring back E&P interest and progress on planned core capex would reignite investor interest in RIL.

Also, completion of the USD 3 billion petrochemical capacity expansions, USD 5 billion refinery off gas cracker (ROGC) project and USD 4 billion petcoke gasification project by FY16 would be the main drivers.

Goldman estimated that gas production would ramp-up to 50 mmscmd by FY17 when newer fields are brought into production.

Among the new businesses, it predicted break-even of retail and telecom ventures by FY16. RIL's shale gas projects in US would give an operating profit of USD 1.3 billion in FY17 against USD 200 million in FY12.

"We estimate the stock could have potential upside of 17 percent over the next 12 months and +57 percent variance over the next two years. Over the next four years we foresee a variance of +90 percent, with a potential blue-sky market capitalization of USD 112 billion in FY17 if RIL progresses successfully along the roadmap," Goldman said.

Goldman said RIL's refining assets are among the best in the world owing to the scale, complexity and configuration that allow it to produce ultra-clean fuels at low cost from heavy, acidic crudes that trade at significant discounts to the lighter varieties.

"This implies that RIL, on average, earns higher refining margins and EBITDA per barrel among its global peer group, which allows it to operate its refinery at high utilization rates even during periods of weak demand amid economic slowdown," it said.

With the planned pet-coke gasification unit, RIL's normalised refining margins would structurally move up as synthetic gas output from the pet-coke gasification unit would replace the expensive LNG that the company is currently using for the utilities associated in the refinery.

"We estimate that it can potentially increase RIL's normalised refining margin by at least USD 2 per barrel, to make USD 11 a barrel margins as the new normal for RIL from FY17," it said.

On E&P business, Goldman said RIL has the unique offering of low finding and development cost and high returns due to the structure of the production sharing contract (PSC).

"While the gas volumes from its KG-D6 producing block have been in steady decline since FY11, we believe the next phase of E&P capex in the block under the integrated development plan with partner BP will lift volumes from FY15," it said.

This will however hinge on natural gas price, which it forecast to rise to an oil-linked USD 8 per mmBtu after March 2014 (from the current USD 4.2 per mmBtu), as a price hike becomes due.

"We note that this gas price hike would actually be deflationary for the economy as it would most likely replace expensive LNG imports and also the government would get incremental revenue from its share in the D6 block," the report said.



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