Reliance Industries (RIL) share price gained in the early trade on February 23 after the company said that it has initiated the process of carving out its Oil-to-Chemicals (O2C) business into an independent subsidiary. The company in a press release said that it will retain 100 percent management control of the subsidiary.
In a notification to exchanges, RIL said that its 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.
The promoter group will continue to hold a 49.14 percent stake in the O2C business after the re organisation and that the process will result in no change in shareholding of the company.
According to the conglomerate, all its refining, marketing and petrochemical assets will be transferred to the O2C subsidiary.
Reliance said that it expects to receive approval orders from National Company Law Tribunal (NCLT) Mumbai and NCLT Ahmedabad by Q2 FY22.
RIL said it expects to retain its investment grade international (BBB+/Baa2) and domestic AAA credit ratings.
Morgan Stanley | Rating: Overweight | Target: Rs 2,252
The O2C demerger plan points to the next leg of expansion & clarity on next investment cycle. It’s a step towards monetisation & acceleration of its new energy & material plans.
The reorganisation will support strategic partnerships & new investors in O2C business and it will have four growth engines- Digital, Retail, New Materials & New Energy.
Research house see significant upside risk to the earnings & multiples for O2C, reported CNBC-TV18.
Also Read – Reliance announces O2C biz spin-off into 100% subsidiary
There should be a reasonable amount of value unlocking and stock is building in EV of USD 62-63 billion for O2C business at current levels. The economic interest in O2C business continues to be 100%, said Harshvardhan Dole, VP-Institutional Equities, IIFL to CNBC-TV18.
The cash generation from O2C business should continue and opportunity landscape for renewables business is significant, he added.
At 09:17 hrs Reliance Industries was quoting at Rs 2,034.35, up Rs 26.25, or 1.31 percent on the BSE.
The share touched its 52-week high Rs 2,368.80 and 52-week low Rs 867.45 on 16 September, 2020 and 23 March, 2020, respectively.
Currently, it is trading 14.12 percent below its 52-week high and 134.52 percent above its 52-week low.
Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd that publishes Moneycontrol.com
