InvestorQ : Can you tell me about the nature of the Reliance O2C hiving off and what purpose will it achieve?
Debbie Mascarenhas made post

Can you tell me about the nature of the Reliance O2C hiving off and what purpose will it achieve?

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Arti Chavan answered.
10 months ago
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During the week, Reliance Industries announced that plans to hive off the oil to chemicals into Reliance O2C Limited had officially taken off. SEBI and exchange approval had already come in although approval of shareholders, creditors and NCLT is expected only by Sep-21. It must be seen as a smart move to create value.

Reliance O2C business will comprise of the oil refining business and the petrochemicals business of RIL. These will be transferred on a value neutral basis, without impacting shareholding patterns or effective value. It will also include RIL stake in oil marketing JV with BP. However, oil and gas extraction business, including the KG-D6 basin business, will remain with the parent Reliance Industries only.

Broadly, it is value neutral to the existing shareholders of RIL and nothing much will change in terms of value, except that the O2C business now becomes a subsidiary instead of being part of the parent. The O2C business gets a distinct legal and financial identity. That could be the first step towards more effective ways to value and monetize the stake in O2c.

There is also a green angle to this story. With Paris Accord happening soon, old-style fuel business will see depleting valuations. O2C will have to be positioned at the cutting edge of energy with focus on green energy, lower accent on fossil fuels and a target to become carbon neutral. Oil and petchem business stood RIL in good stead for over 40 years. It is time for a quantum shift in direction and O2C is all about that.

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