Reliance Industries announces demerger of its oil to chemical business; stock trades positively

Reliance Industries Limited (RIL) today announced that it is carving out of O2C business into a separate independent subsidiary.   

The company said that it will retain 100 per cent management control of the newly-formed subsidiary. It further notified that the development will not have any impact on its consolidated financial position, cost of capital, borrowings, and investment-grade international & domestic AAA credit ratings.  

The company notified the exchange that the promoter will continue to hold a 49.14 per cent stake in the O2C business and the reorganisation would result in no further change in the shareholding of the company. Their existing O2C operating team will shift to the newly-created subsidiary, but for the convenience of the investors, there wouldn’t be a dilution of earnings or any restriction on cash flows.   

The main motive of the demerger is to facilitate value creation through strategic partnerships. The demerger comes after the company is again in talks with the world’s largest crude oil exporter, Saudi Aramco. Saudi Aramco is in the process of picking up a 20 per cent stake in RIL’s O2C business. RIL also expects to attract dedicated pools of investor capital after this demerger.  

The company has received a nod from SEBI and stock exchanges for the reorganisation. However, it is yet to get a clearance from the equity shareholders & creditors, the income tax authority as well as National Company Law Tribunal (NCLT) benches in Mumbai and Ahmedabad, which is expected to be completed by Q2FY22.        

The shares of the company reacted positively and at 12.35 pm today, the company’s stock was trading at a price of Rs 2,036, up by 1.43 per cent from its previous close.