Maintain 'buy' on RIL with TP of Rs.827 - Geojit BNP Paribas Financial Services Limited

Reliance Industries has announced a buy- back plan of about USD 2 billion at a price up to Rs.870/ share. The company could buy-back about 120 million shares.

The buy- back amount is not up to expectation, the price announced is a positive surprise.

It seems that the buy-back is announced to assure investors that the company is taking steps to address the concerns about the stock's underperformance and also to protect the downside until the company and BP works on addressing the E&P (exploration and production) issues.

It does not seem that the buy-back would act as a catalyst for a re-rating of the stock and the upside on the stock would be capped in the light of deteriorating fundamentals in the core refining and petrochemicals businesses.

For 3QFY12, the company reported operating profit of Rs.7290 crore and net profit of Rs.4440 crore, 14% down yoy and 22% lower qoq.

Weak results are mainly due to disappointing GRM (gross refining margins), declining profit from KG-D6 and weak petrochemicals market.

Source : Equity Bulls

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