Merger with RPL positive for RIL: Dimensions Consulting

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Merger with RPL positive for RIL: Dimensions Consulting

Ajay Srivastava, Dimensions Consulting said RIL-RPL deal is positive for RIL and RIL will benefit from the cash flows.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 01/06/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Reliance Petroleum |

Ajay Srivastava of Dimensions Consulting said the RIL - RPL deal is positive for RIL and it will benefit from the cash flows.

He further said, "I would put a positive bias on Reliance because two things are happening; huge amount of cash flow comes into each one's balance sheet and also a non-operating asset, a 70% shareholding equivalent becomes an operating asset. So you will take a little more positive bias on Reliance at this point of time compared to the pre-merger time, so definitely a positive for Reliance."

Here is a verbatim transcript of the exclusive interview with Ajay Srivastava on CNBC-TV18. Also watch the accompanying video.

Q: What have you made of the news, RIL-RPL 1:16?

A: The only surprise part was that it wasn't skewed in favor of Reliance. That surprised everybody but while as on expected lines at the end of the day if you are an RPL share holder you can feel a little cheated because, RPL asset is a more secure and safe cash generating asset. So you might feel cheated that no premium was given, given the exploration issues with Reliance you can say of premium there also. But I think the RPL share holder has the right to feel cheated due the amalgamation and he got nothing out of it.

Q: Would you change your view dramatically on any of these two stocks going forward because of this merger?

A: I would put a positive bias on Reliance definitely because two things are happening; huge amount of cash flow comes into each ones balance sheet and also a non-operating asset, a 70% shareholding equivalent becomes an operating asset. So definitely you will take a little more positive bias on Reliance at this point of time compared to the pre-merger time, so definitely a positive for Reliance. 

Q: What about Tata Steel, it announced numbers on Friday; it went up 6% on Friday and down 5% this morning?

A: Yes that's a yo-yo but what's happening on the ground is important, post the excise duty change its more surprising that steel price have actually gone up in the economy. The day the excise duty cut was announced all the steel majors increased their prices be Rs 400-500 a tonne. So in net-net I can see for this quarter at least for Tata steel, their realization is going to go up compared to the previous quarter. Yes, Corus will be a drag on the balance sheet, standalone, Tata Steel is greatly better than last quarter and with Corus it gets worse. So if you look at the results stand alone, Tata Steel is going to be better than the last quarter definitely. 

Also read: RIL-RPL merger: Swap ratio at 1:16

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