Mukesh Ambani’s RIL initiates O2C biz spin-off, expects NCLT approval by second quarter of FY22

Mukesh Ambani, RIL, O2CThe oil-to-telecom conglomerate will transfer all refining, marketing and petchem assets to O2C. Image: Reuters

Mukesh Ambani-led Reliance Industries Ltd (RIL) announced that the firm has initiated the process of carving out O2C (oil-to-chemical) business into an independent subsidiary. The firm in a late night notification to the exchanges said this will enable focused pursuit of opportunities across the O2C value chain, enhance efficiencies through self-sustaining capital structure and a dedicated management team. This will also attract dedicated pools of investor capital. Moreover, the reorganisation 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. Also, there will be no dilution of earnings or any restriction on cash flows. RIL is likely to retain its investment-grade international (BBB+/ Baa2), and domestic AAA credit ratings.

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.

RIL, in a notification, also said that Reliance Industries Ltd 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 the capital market regulator Securities and Exchange Board of India (Sebi) and the stock exchanges. 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.

Reliance for the first time reported integrated earnings of the O2C business in its third-quarter financial results. Before that, refining and petrochemical businesses were reported 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.

RIL had started working on hiving off the O2C business into a separate unit last year for a possible stake sale to companies such as Saudi Aramco. Reliance Industries has the country’s largest petrochemical manufacturer with units at Jamnagar, Dahej, Hazira, Nagothane, Vadodara, Patalganga, Silvassa, Barabanki, and Hoshiarpur.

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