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Reliance announces O2C biz spin-off into 100% subsidiary – Moneycontrol

Reliance Industries expects various approvals for the O2C business-related reorganisation to be in place by the second quarter of FY22

Reliance Industries (RIL) said on February 23 that it is carving out its Oil-to-Chemicals (O2C) business into an independent subsidiary. RIL said it will retain 100 percent management control of the new subsidiary.

In a notification to exchanges, RIL said that the promoter group will continue to hold a 49.14 percent stake in the O2C business after the reorganisation and that the process will result in no change in shareholding of the company.

The existing O2C operating team will move to the newly created subsidiary with the transfer of business, but there will be no dilution of earnings or any restriction on the cash flows, RIL said.

According to the conglomerate, all of its refining, marketing and petrochemical assets will be transferred to the O2C subsidiary.

The move is expected to facilitate value creation through strategic partnerships, including the deal with Saudi Aramco, and attracting dedicated pools of investor capital. The company said that talks with Aramco are still on. The world’s largest crude oil exporter Saudi Aramco is in the process of picking up a 20 percent stake in RIL’s O2C business.

RIL has also extended an interest-bearing loan of $25 billion to the O2C business. The O2C business will pay floating rate interest linked to one-year SBI MCLR rate. The loan to the O2C business will be paid as and when the strategic investors come in.

RIL said it has already received a nod from the Securities and Exchange Board of India (Sebi) and stock exchanges for the reorganisation. However, it is yet to get a clearance from equity shareholders and creditors, the income tax authority and National Company Law Tribunal (NCLT) Mumbai and Ahmedabad.

Reliance expects various approvals for the reorganisation to be in place by the second quarter of FY22.

Following this reorganisation, RIL’s stake in Reliance Retail Ventures will be 85.1 percent and that in Jio Platforms will be 67.3 percent. The proposed O2C subsidiary will include the fuel retail subsidiary in which RIL has a 51 percent stake and the remaining 49 percent belonging to BP plc.

The company said it expects to retain its investment grade international (BBB+/Baa2) and domestic AAA credit ratings.

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Shine Jacob