Somebody's Wrong on Reliance

Shareholders in Reliance Industries haven't had it this good for a long time. After years of under-performance, the Indian oil refiner's stock has zoomed 21 percent since the end of September, versus a 6 percent drop in the benchmark Sensex. Chairman Mukesh Ambani's net worth has swelled to $21.7 billion. And now, its latest quarterly earnings have shown that cheap crude is lubricating margins even more than analysts had expected.

Yet the bond market doesn't seem to have got the merry memo. Those who purchased the company's 2025 notes at the start of last quarter have made a 0.6 percent return to date. The cost of insuring Reliance's debt against nonpayment using credit-default swaps, meanwhile, touched 219.4 basis points in early October, the highest since February 2014, and remains a rather elevated 184.7 basis points. This despite the company announcing a $2.2 billion rights issue, which will improve its debt-to-equity score.