HSBC has downgraded energy major Reliance Industries (RIL) to 'neutral' from 'overweight' and cut the price target to Rs 1,040 from Rs 1,084, citing reports of Comptroller and Auditor General of India (CAG) saying the oil ministry and Director General Hydrocarbons (DGH) bent rules for RIL.
CAG in a draft audit report on the KG-DWN-98/3, or KG-D6, block said DGH allowed the Mukesh Ambani-led company to hike capital expenditure for developing Dhirubhai-1 and 3, the largest of 18 gas finds in the block, by 117 per cent.
The investigation could result in a freezing of bureaucratic decision making, which would hamper RIL's ability to carry out exploration and production activities effectively in its blocks, HSBC said in a note.
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Reliance Industries has underperformed the benchmark Sensex by 12 per cent over the last three months on concerns of falling gas production from its KG-D6 block, off the Indian eastern coast.
- With inputs from Agencies