Reliance Industries initiates demerger of O2C biz to attract global investors

23-02-2021

Mukesh Ambani-led Reliance Industries on Tuesday announced that it has initiated the process to demerge its O2C (oil-to-chemical) business into a wholly-owned subsidiary. This will enable the oil-retail-telecom behemoth to attract global investment in its O2C business. The company has sought shareholder and creditor approval for the same. In a late-night notification to exchanges, RIL said that this will enable focused pursuit of opportunities across the O2C value chain, enhance efficiencies through self-sustaining capital structure and a dedicated management team. Spin-off of O2C business will be beneficial to all stakeholders of RIL as management control of O2C will continue with RIL, and the existing O2C operating team will move with the transfer of business, the company said adding that there will be no dilution of earnings or any restriction on cash flows. The oil-to-telecom conglomerate will transfer all refining, marketing and petchem assets to O2C. RIL standalone entity will have all existing segments other than O2C business. The �new RIL� will develop a green energy ecosystem, including renewable power to meet growing energy needs, and adopt new technologies to reduce the carbon footprint for O2C. �Reliance Industries Ltd and O2C will work together to achieve net carbon zero by 2025,� Mukesh-Ambani-led firm said in a presentation. In a presentation shared with the exchanges, the company said that RIL will further accelerate its New Energy & New Materials business towards its vision of clean and green energy development. RIL said that it has already received approvals from Sebi the stock exchanges for the proposed spin off. The company will now seek approvals from shareholders and creditors. The company has already filed for approval with National Company Law Tribunal (NCLT) at Mumbai and Ahmedabad and expects it to be completed by the second quarter of FY22. Worth mentioning here is that in the third quarter of the current financial year, RIL for the first time reported integrated earnings of the O2C business. Earlier, RIL used to report earnings of refining and petrochemical businesses separately while fuel retailing revenue was part of the firm�s overall retail business. In the third quarter of the current fiscal, the company reported refining and petrochemical as well as fuel retailing businesses earnings as one. At present, RIL is the country's largest petrochemical manufacturer with units at Jamnagar, Dahej, Hazira, Nagothane, Vadodara, Patalganga, Silvassa, Barabanki, and Hoshiarpur.