RIL disappoints at shareholder meet, shares fall

June 4, 2011 2:32 AM EDT

Reliance Industries will work with BP Plc to address production issues at its KG-D6 block in India, chairman Mukesh Ambani said at the firm's annual meeting on Friday, but its shares fell as investors were disappointed by a lack of specifics.

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RIL, India's largest listed firm, is controlled by Ambani, the world's ninth richest man with a net worth estimated at $27 billion, according to Forbes.

The company, which has focused on energy as its core business, is now expanding in other industries. Ambani told shareholders Reliance planned to invest aggressively in retail and would launch a 'cash-and-carry,' or wholesale business.

But sluggish gas production has been an overhang on the company's stock, valued at $69 billion. The shares have fallen more than 10 percent this year, contributing significantly to the comparative 9.8 percent fall in the main Mumbai index, in which the stock has the heaviest weight.

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On Friday, the shares fell more than 2 percent following Ambani's remarks.

"There was no clarity on many things. There were lot of areas, which were unaddressed in the speech, be it banking, be it gas," said Jagannadham Thunuguntla, head of research at SMC Global Securities.

The company is also looking to expand in sectors such as telecom, retail, financial services and hospitality.

"Reliance is endowed with a strong balance sheet and depth of talent," Ambani said, adding that the company was "uniquely placed to pursue multiple growth opportunities."

But energy is still the company's mainstay.

Its D6 block in the Krishna Godavari basin off India's east coast is its biggest gas producer, but output has slipped due to technical problems to about 52 million cubic metres a day (mcmd) from 60 mcmd in 2010 and short of a target of 80 mcmd.

In February, Reliance agreed to sell a stake in 23 of its oil and gas blocks, including some in the KG basin, to BP in a $7.2 billion deal, and is expected to benefit from BP's deepwater exploration expertise.

"After the government approvals for BP-Reliance partnership, KG-D6 reservoir will be jointly assessed to address technical issues in ramping up production," Ambani said, adding later that he expects the deal to be approved in the next few weeks.

Reliance shares provisionally closed at 936 rupees, down 1.6 percent, after being up 1.7 percent before Ambani's remarks. The stock was the second-biggest loser in the 30-share benchmark index. The Mumbai market was down 0.5 percent.

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