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Market bets on ADAG stocks on SP's poll victory prospect

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Stock market traders are betting on a change in fortunes for Anil Ambani group companies on the prospect of the Samajwadi Party’s (SP) return to power in Uttar Pradesh.

In a weak market, the share price of flagship Anil Ambani group companies and rose 5.52 per cent and five per cent, respectively, as political pundits predicted the SP was close to forming the next government in the country’s largest state. The fell 1.58 per cent.

Both these companies have mega projects in UP, which may accelerate if the SP returns to power, experts say.

Exit polls have projected the SP emerging as the single largest party in the 403-seat Assembly. A exit poll showed the party winning 183 seats, followed by the BSP with 83 seats. Headlines Today exit polls showed the SP getting 195-210 seats, followed by the BSP with 88-98. Ambani’s proximity to the SP is well known and his group has been the party’s choice for the state’s mega power project. An earlier UP government led by the SP had signed a state support agreement for what was touted as the world’s largest gas-based power project to be commissioned by Reliance, with a capital outlay of Rs 11,000 crore.

CHANGE OF FORTUNES?
With markets expecting the to win the election, the prices of ADAG stocks rose sharply, whereas almost all benchmark indices were down more than 1%
  5-Mar % chg*
ADAG GROUP STOCKS
Reliance Infra. 656.15 5.52
Reliance Power 135.35 5
Reliance Comm. 96.65 1.58
JAIPRAKASH GROUP STOCKS
Jaiprakash Associates 70.34 -5.58
Jaiprakash Power Ventures 41.25 -5.5
Jaypee Infratech 43.75 -4.68
BSE prices in Rs   *Change over previous close     Compiled by BS Research Bureau

“If the SP returns, land for the Dadri power plant is likely to be made available and the project will accelerate. Only, Ambani will have to source gas from outside India, which may not be a problem, to revive the world’s largest power project,” said S P Tulsian, an independent equity analyst.

After his split with brother Mukesh in 2005, Anil Ambani had identified the power business as a growth area and UP a key state. Anil Ambani was an independent member of Rajya Sabha in 2004 from Uttar Pradesh during the SP’s rule. The bonhomie between him and SP chief Mulayam Singh Yadav was such that the latter was present when Ambani filed his election papers.

“The SP’s win may give Anil Ambani the much-needed leverage. Stock markets know that both Ambani and Yadav require each other in their scheme of things. The cash flow for Reliance companies may improve once pending power projects are put on execution mode,” said Kishor Ostwal, managing director of CNI Research.

When the SP ruled the state earlier, Ambani’s plan was an 8,000-Mw gas-based power plant in Dadri, which tripped at the land acquisition level itself. The Mulayam government had acquired 2,500 acres on Ambani’s behalf, citing “public purpose”. That did not progress further under the Mayawati-led BSP’s rule.

In 2008, in the wake of the Singur and Nandigram issues, the propriety of governments buying land for companies became a subject of controversy and the Dadri land acquisition issue landed in court.

In December 2009, the Allahabad High Court described the Mulayam government’s move as a "colourable exercise of power to bypass rules" and asked Reliance Power to return the land.

Reliance Power, which raised around Rs 9,000 crore through a public issue, fell behind on its 2017 target of 35,000 Mw.

Meanwhile, traders today went short on the share price of JP Associates, JP Power Ventures and JP Infratech, which fell five per cent, 5.5 per cent and 3.8 per cent, respectively. The JP group won a number of projects under BSP rule, including the Ganga Expressway. Also, the share prices of sugar companies rose as the SP has shown a favourable attitude towards the state’s sugar industry. It is expected to bring back some of the benefits it extended to the industry in 2004. The benefits had been scrapped by the Mayawati government in 2007.

The share price of Bajaj Hindustan rose nearly three per cent, Oudh Sugar Mills gained 7.9 per cent and Dwarikesh Sugar was up 3.3 per cent.

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