Tuesday, 23 February 2021
Mukesh Ambani-owned Reliance Industries’ (RIL’s) proposal to carve-out oil-to-chemicals (O2C) business into an independent subsidiary is a step towards monetisation and towards the next leg of multiple expansion, say analysts.
In a late night announcement on Monday, RIL said it plans to reorganise its O2C business and make it a separate entity that will be 100 per cent owned by RIL. In a presentation to investors, the company stated that it is looking at completing the process by FY22.
RIL, the investor presentation said, will focus on new energy and new materials business “towards its vision of clean and green energy development.” The company also plans to develop or introduce new technologies to reduce carbon footprint for O2C business and plans to achieve net carbon zero by 2035.
It further added that while RIL and O2C business will become two different entities, the company ensures that both will have "close interplay”.
“With this reorganization, RIL will have four growth engines – digital, retail, new materials and new energy. While the market appreciates the value for the first two businesses, we see significant upside risk to earnings and multiples for O2C as RIL invests in new energy/technology,” notes Mayank Maheshwari, equity analyst at Morgan Stanley in a report dated February 23.