RIL shares gain on initiating O2C biz spin-off

RIL said it has initiated the process of carving-out O2C business into an independent subsidiary. The company said the reorganization would enable a focused pursuit of opportunities across the O2C value chain, improved efficiencies through a self-sustaining capital structure. Reorganisation of O2C business facilitates participation by strategic investors and marquee sector focused investors, it added.

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

The management control of O2C will continue to be with RIL. 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’s refining, marketing and petrochemical assets will be transferred to the O2C subsidiary. RIL said it is expected to retain its investment grade international (BBB+/ Baa2), and domestic AAA credit ratings.

The index heavyweight expects to complete the demerging process into an independent subsidiary by the second quarter of FY22. 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) benches in Mumbai and Ahmedabad.

RIL has acknowledged that there are ongoing talks with Aramco for a deal. 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. It is a long-dated loan with flexibility to structure repayments.

RIL also announced that it aims to become net carbon zero by 2035. RIL is India’s largest private sector company. Its activities span hydrocarbon exploration and production, petroleum refining and marketing, petrochemicals, retail and digital services.

On a consolidated basis, RIL reported 12.5% rise in net profit to Rs 13,101 crore on 23.12% decline in net sales to Rs 117,860 crore in Q3 December 2020 over Q3 December 2019.

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