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Reliance initiates process for carving out O2C biz into independent subsidiary

Reliance Industries Ltd (RIL) has initiated the process of carving-out its O2C business and turn it into an independent subsidiary, expects it to be completed by Q2FY22

Reliance initiates process for carving out O2C biz into independent subsidiary
Reliance initiates process for carving out O2C biz into independent subsidiary
  • The demerger will facilitate the entry of Saudi Aramco, which plans to pick up 20 percent stake in the O2C business

  • RIL also told its shareholders that talks with Saudi Aramco are going on for one of the largest downstream transactions in India

New Delhi: Reliance Industries Limited (RIL) has initiated the process of carving-out its O2C business and turn it into an independent subsidiary and expects it to be completed by the second quarter of FY22, the company said in a regulatory filing to the stock exchanges on Tuesday. The demerger has been on the cards for a while now and will allow the Mukesh Ambani-led company to attract global investment in its O2C business. The demerger will also facilitate the entry of Saudi Aramco, which plans to pick up 20 percent stake in the O2C business. In the regulatory filing, RIL also told its shareholders that talks with Saudi Aramco are going on for one of the largest downstream transactions in India.

Reliance Industries said that an independent company will allow focused pursuit of opportunities across O2C value chain, enhance efficiency through self-sustaining capital structure and dedicated management team, facilitate creation through strategic partnerships and attract dedicated pools of investor capital. RIL has sought an approval from its shareholders and creditors for the process.

‘Spin-off of O2C business will be beneficial to all RIL stakeholders’

While stating that the creation of a 100 percent owned subsidiary called Reliance O2C Limited will be beneficial to all stakeholders, RIL said that the management control of the company will rest with Reliance Industries. The existing O2C operating team will move with the transfer of business and there will be no dilution of earnings or any restriction on cash flows, said RIL. The oil-to-chemical subsidiary will have all of RIL’s refining, marketing and petchem assets — including the world’s largest refining complex at Jamnagar and global-scale petrochemical units. However, upstream oil and gas producing assets will not be part of the subsidiary. 

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RIL said that the promoter group will continue to hold 49.14 percent stake in the O2C business after the reorganisation and therefore the shareholding pattern of the company will not change. It added that it has already sought approvals from the National Company Law Tribunal (NCLT) at Mumbai and Ahmedabad. 

What will be next for RIL?

In a presentation to the stock exchanges, RIL listed new energy and new materials business and digital platform ecosystem and incubation platforms under the head new businesses. It added that the ‘new’ Reliance Industries will focus on developing a green energy ecosystem, build an optimal mix of reliable, clean and affordable energy and storage using solar, wind and batteries, accelerate transition to a Hydrogen economy and will develop a portfolio of advanced and specialty materials. “Reliance Industries Ltd and O2C will work together to achieve net carbon zero by 2025,” said the company in the presentation. RIL is expected to retain its investment grade international (BBB+/ Baa2), and domestic AAA credit ratings, said the company.

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