RIL announces O2C business spin-off into 100% subsidiary

RIL announces O2C business spin-off into 100% subsidiary

Shares of Reliance Industries (RIL) rallied after it has initiated the process of carving out its Oil-to-Chemicals (O2C) business into an independent subsidiary.
RIL’s 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% stake in the O2C business after the re organisation and that the process will result in no change in shareholding of the company.
The refining, marketing and petrochemical assets will be transferred to the O2C subsidiary.
Reliance expects to receive approval orders from National Company Law Tribunal (NCLT) Mumbai and NCLT Ahmedabad by Q2 FY22.

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.
However, there is significant upside risk to the earnings & multiples for O2C.
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%.

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