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Goldman Sachs upgrades RIL to BUY

January 13, 2007

Goldman Sachs which has initiated coverage on India’s laregst company, Reliance Industries Ltd has upgraded it to BUY from Neutral with a 12 month price target of Rs 1660.

They value Reliance on sum-of-the parts methodology based on peak cycle valuation of 5.5X FY2008E (March) EBITDA for refining, near-peak cycle valuation of 6.0X FY2008E EBITDA for the petrochemical business, and DCF for the E&P and organized retail ventures to arrive at our target price of Rs1,660.

The sum of parts valuation of Reliance Industries’s individual business segments are valued as follows.

Chemicals – Rs 244
Refining – Rs 256
Investments – Rs 181
Reliance Petroleum Value – Rs 169
Reliance Retail – Rs 154
E&P Existing – Rs 61
E&P New – Rs 595

E&P probably means exploration and production.

Goldman expects fully diluted EPS of Rs79, Rs76 and Rs101 for FY07, 08 and 09 ending in March.

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