Reliance Industries Shares Fall As Delhi High Court Reverses Arbitral Award Dismissal

Shares of Reliance Industries Ltd. fell on Tuesday extending decline, after it received Rs 24,522-crore ($2.81 billion) demand from the Ministry of Petroleum and Natural Gas. The demand was after the Delhi High Court reversed judgment that dismissed the appeal challenging an arbitral award to the company.

This figure represents a significant increase from the previous $1.55 billion demand, reflecting additional calculations related to the gas migration issue. If the company is liable to pay this amount, it would represent approximately 31% of the company’s profitability over the past 12 months.

RIL, along with BP Exploration (Alpha) Ltd. and NIKO (NECO) Ltd., had won an arbitral award in a dispute regarding alleged gas migration from ONGC’s blocks in the KG-D6 area. The government had accused the consortium of causing gas migration from the ONGC blocks, leading to a claim of $1.55 billion in 2014.

The government in 2016 had sent a notice to RIL and its partners British Petroleum and Niko. However, in 2018 an international arbitration had ruled in the favour of the company.

On May 9, 2023, a single judge of the Delhi High Court dismissed the government's appeal against the arbitral award, effectively upholding the original decision. However, the government escalated the matter by filing an appeal before the division bench of the Delhi High Court. The division bench reversed the single judge’s decision.

In response to the division bench ruling, Reliance Industries has said that it is taking steps to challenge the judgment and has sought legal advice to further contest the matter in higher courts.

In a separate matter, Reliance Industries’ wholly owned subsidiary, Reliance New Energy Ltd., was fined Rs 125 crore for failing to establish a battery cell plant under the government’s Production Linked Incentive scheme.

Shares of Reliance Industries fell as much as 1% to Rs 1,159.55 apiece, the lowest level since March 3. They pared losses to trade 0.03% higher at Rs 1,171.65 apiece, as of 11:15 a.m. This compares to a 0.18% decline in the NSE Nifty 50.

The stock has fallen 22.45% in the last 12 months. The relative strength index was at 29, indicating it was oversold.

Out of 38 analysts tracking the company, 34 maintain a 'buy' rating, one recommends a 'hold' and three suggest 'sell', according to Bloomberg data. The average 12-month analysts' consensus price target implies an upside of 31.2%.