SC verdict a big win for RIL, says Purven & Gertz

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SC verdict a big win for RIL, says Purven & Gertz

In a severe blow to the Anil Ambani group seeking cheap gas from Reliance Industries, the Supreme Court ruled that the government will have the last word on pricing.

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Excerpts from India Business Hour on CNBC-TV18 Watch the full show » RELATED NEWS RIL-RNRL legal soap ends, what to expect now? What to expect from today's RIL-RNRL ruling? ALSO READ See latest News about Reliance See previous management interviews See what other Experts & Brokerages are saying about Reliance Reliance BSE | NSE 29/05/12 Are Mutual Funds betting on Reliance? Other Stocks in this news Reliance Natural Resources |

In a severe blow to the Anil Ambani group seeking cheap gas from Reliance Industries (RIL), the Supreme Court (SC) ruled that the government will have the last word on pricing.The three-judge bench of the apex court, headed by Chief Justice KG Balakrishnan, ruled in favour of RIL. The court held that the government's production sharing contract (PSC) was supreme and hence the Ambani family MoU was not binding.

The court also directed RIL to initiate negotiations with Reliance Natural Resources Limited (RNRL) within six weeks to arrive at a sale agreement within the framework of government policy.

In an interview with CNBC-TV18, Victor Shum, Senior Vice President of Purvin & Gertz, spoke about his outlook on the same.

Here is a verbatim transcript of an exclusive interview with Victor Shum on CNBC-TV18. Also watch the accompanying video.

Q: What is your impression of the verdict that happened in Supreme Court? How do you think foreign investors-both equity investors and investors in energy would be viewing this development?

A: Speaking from the point of view from somebody outside India and stepping into the shoes of perhaps international energy companies thinking about investing in the oil and gas sector of India. This decision is going to make international energy companies think twice about investing in India's oil and gas sector because what it essentially means is that the Government of India will have the right to set the price and dictate who companies can sell to. This is not consistent with the spirit of the new exploration and licensing policy of the year 2000. Even though this has clarified the investment situation in India, this is going to make international energy companies think twice about investing in oil and gas sector. So that is going to perhaps slowdown exploration and production activities in India over the longer haul.

Q: You are saying that foreign investors will be more hesitant or more apprehensive at investing in the Indian market or the Indian oil and gas market at this point in time on the back of what we have seen this afternoon. The verdict backs Reliance Industries. Is this is significant leg up as far as Reliance and this stock is concerned?

A: Positive outcomes for Reliance Industries is going to certainly boost its, already very strong profit margins from the KG Basin gas and the customers of Reliance Industries will continue to receive gas. So it's a big win for Reliance Industries and Reliance Industries can continue to bring on stream more gas from the KG Basin and its going to continue to develop the pipeline in the infrastructure to distribute gas for the country. So it's great for Reliance Industries.