Options traders are the most bearish on Reliance Industries Ltd. (RIL) in two years as India’s biggest company by market value faces a decline in natural-gas production that may take two years to reverse. The ratio of outstanding puts to sell the shares versus calls to buy reached 1.43 yesterday, the highest open interest ratio since October 2009, data compiled by Bloomberg show. Reliance has dropped 21 percent this year, compared with a 16 percent slide in the benchmark BSE India Sensitive Index. The company, controlled by billionaire Mukesh Ambani, has been struggling to reverse a decline in gas production from the KG-D6 block, which has cut supplies to utilities and fertilizer makers in Asia’s second-fastest growing major economy. Boosting output may take a couple of years, Sashi Mukundan, the head of BP Plc’s India unit, said Sept. 6. BP owns 30 percent of KG-D6. “Gas output is the biggest worry for Reliance and there’s been no real clarity or timeline on this,” Arun Kejriwal, a director at Kejriwal Research & Investment Services Pvt., said by phone from Mumbai. “The company has been an underperformer by a fair distance. Gas will keep dragging it down.” The shares fell 2.2 percent to 833.7 rupees at 1:24 p.m. in Mumbai, ending three days of advances. Reliance last month briefly lost its position as India’s most valuable company and the stock, with the highest weighting in the Sensex, touched a 29-month low of 719.4 rupees on Aug. 26. “An addition of 200,000 shares yesterday in 780 rupees and 800 rupees strike shows negative momentum,” said Yogesh Radke, analyst at Edelweiss Financial Services Ltd. in Mumbai. “Traders are buying protection as the stock may cool off on falling gas output.” Doubling Supplies The KG-D6 block started in April 2009 and production rose to 60 million cubic meters a day in June last year, according to Reliance filings. Output has since slid because of technical issues, the company has said, without elaborating. The field was expected to produce as much as 80 million cubic meters a day, more than doubling India’s domestic gas supplies. Lower-than-expected gas output has resulted in Reliance failing to beat analysts’ earnings expectations in five of the last six quarters. Profit in the June quarter rose 17 percent to 56.6 billion rupees ($1.3 billion), meeting forecasts, the company announced July 25. Reliance plans to tap BP’s expertise to reverse the drop in production. The British company bought stakes in the KG-D6 block and 20 other areas operated by Reliance locally in a $7.2 billion deal announced in February and completed last month. A call option gives investors the right to buy a security at a set price by a specific date. A put option gives the right to sell. Investors use options to guard against fluctuations in the prices of securities they own, speculate on share-price moves or bet that volatility will rise or fall. To contact the reporters on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net; Rakteem Katakey in New Delhi at rkatakey@bloomberg.net To contact the editors responsible for this story: Darren Boey at dboey@bloomberg.net; Amit Prakash at aprakash1@bloomberg.net

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