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Reliance Industries to ‘De-merge’ its O2C Unit to Launch Separate Subsidiary

Mar, 2021 - By WMR

Reliance Industries to ‘De-merge’ its O2C Unit to Launch Separate Subsidiary

On February 23, 2021, Mukesh Ambani-owned Reliance Industries Limited (RIL) announced their plan to withdraw their stakes from Reliance Oil-to-Gas (O2C) Limited and launch a separate unit for petro-chemical and oil refinery business.

Reliance Industries Limited (RIL) has announced to take out its O2C business unit, which holds the petrochemical and oil refinery assets of the company. While the company still awaits the approvals from its shareholders, income tax department, NCLT, and the regulatory authorities to demerge the O2C from the parent company. The Indian conglomerate has filed for re-organization to the National Company Law Tribunal (NCLT) present in Mumbai and Ahmedabad for the approval to begin its operations. The company plans to shift all of its petrochemical and refining assets to the newly independent unit, O2C business. The oil refinery and petro-chemical unit of RIL is a shared subsidiary with the Bharat Petroleum (BP) with the stakes ratio of 51:49 to be equally distributed among them. The RIL will be transferring the O2C assets comprising of 12 manufacturing plants, into a wholly owned subsidiary with a debt of US$ 25 billion from the parent company itself. As a listed company, RIL revealed that it cannot distribute the shares with dissimilar rights among the investors.

Since last year, the Reliance Industries Limited has been in talks with Saudi Aramco for the acquisition of stakes in O2C assets. In August 2019, the Saudi Arabian oil company had proposed a valuation of US$ 75 billion for 20% stakes in the O2C unit of RIL. This decision of separating the O2C unit is to grab the same deal with the Saudi Aramco. The government of Saudi Arabia is expected to invest in sustainable energy resources. The global shift to renewable energy and the rising demand for electric-driven vehicles are the possible factors that had led the RIL to create a separate unit of O2C business.

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