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Reliance up on deregulation hopes

Shares of India's largest private oil refiner Reliance Petroleum Ltd rose as much as 4.4 per cent on Thursday on hopes petroleum product prices will be decontrolled this year and news of a stake sale to a foreign company.

Its shares hit a high of Rs 60.75, and subsequently eased to Rs 59.30 by early afternoon, still up 1.9 per cent from Wednesday's close. The Sensex was down 18.92 points at 4,028.72.

"It (the share price) is reacting to the two news developments," an analyst at a foreign brokerage said.

An Indian economic daily reported on Thursday that the government is considering lifting price controls on petroleum products this year instead of in 2002 as earlier planned.

"Reliance will be a key beneficiary of the move," the analyst said.

The government fixes ex-refinery prices of five fuels -- kerosene, LPG, petrol, aviation fuel and diesel - using international fuel prices as a benchmark. But prices of individual products are adjusted, some selling above international standards and others below.

Petrol and aviation fuel, energy sources used primarily by better-off consumers in India, are priced high, and the resulting windfall used to subsidise the lower prices charged for kerosene and LPG, used primarily as cooking fuels.

Another national daily also reported that Kuwait Petroleum Corporation is negotiating to buy a 12 per cent stake in Reliance Petroleum at a price of Rs 90 per share, roughly a 50 per cent premium to the stock's current market value.

The Times of India, quoting an unnamed senior KPC executive, said the Kuwaiti oil company is negotiating to buy that stake from the family of Dhirubhai Ambani, the founder of the Reliance group of companies, one of India's largest industrial groups, which is branching out into telecommunications.

Reliance Petroleum, founded by India's biggest petrochemicals company Reliance Industries Ltd, runs a 540,000 barrels-per-day refinery at Jamnagar.

RPL is 64 per cent owned by the Reliance Group, with foreign investors holding about 7 per cent and domestic financial institutions another 9 per cent. About 2 million retail investors hold about 20 per cent.

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