1. Reliance-BP Deal
Event Study Analysis
Project Finance Abhineet Gaurav | Dimple Bhatia | Harsh Bansal | Yash Jain

2. Steps in Event Study Analysis
1 Event Definition
2 Selection Criteria
3 Normal & Abnormal Return Measurement
4 Estimation Procedure
5 Testing Procedure
6 Empirical Results
7 Interpretation

3. What is an Event Study?
• An event study attempts to measure the valuation effects
of a corporate event, such as a merger or earnings
announcement, by examining the response of the stock
price around the announcement of the event.
• One underlying assumption is that the market processes
information about the event in an efficient and unbiased
manner.

4. The Deal- $7.2bn oil & gas investment by BP
1. BP paid $7.2 bn to buy into India's fast growing oil and natural gas
business. Additional $1.8bn contingent on finding more oil
2. BP took a 30 percent stake in 23 oil and natural gas fields operated
by Reliance Industries, India's largest private company
3. No valuation premium. The advantage was mainly in the form of
expertise that BP brought to the table.
4. The two companies also created a 50-50 joint venture to
buy, transport and market natural gas, which is increasingly in
demand in India as the country's economy grows at nearly 9
percent a year

5. The Deal- $7.2bn oil & gas investment by BP
Event Date 21st Feb 2011
• Event window: 7 trading days (16th Feb to 24th Feb 2011)
• Clean period -41 to -240 days (March 11, 2010 to Dec
10, 2010)
Data Collected for
• BSE 500 market index
• BSE OIL & Gas Index
• Reliance Industries Limited

6. Methodology
1 Event Definition
2 Selection Criteria
✓3 Normal & Abnormal Return Measurement
4 Estimation Procedure
5 Testing Procedure
6 Empirical Results
7 Interpretation

7. Results
• Cumulative Abnormal Return 3.889%
– Over the 7-day event window
• Z score = 2.54
– Return > 0 at 99% confidence level
– Positive reaction to the deal by the market
• Increase in shareholder value US$ 2.37 bn

8. Limitations
• Impact of the deal may have dissipated over a larger period
– Regulatory issues and eventual resolution
– Prior information through unofficial sources / insider information
• Likelihood of other influences during clean period
• Other influences during the event window
• Identifying the optimal event window
– Trading holidays during the event window
• Identifying an appropriate peerset

9. THANK YOU!