India’s Reliance unveils details of oils-to-chemicals business carve out

Author: Priya Jestin

2020/09/07

MUMBAI (ICIS)--Indian conglomerate Reliance Industries Ltd (RIL) released a detailed plan to carve out its oil-to-chemicals business into a separate entity for a potential stake sale, the company said in a filing on Sunday.

As per the scheme, RIL’s oil-to-chemicals (O2C) assets, including its refining, petrochemicals, fuel retail (majority interest only) and bulk wholesale marketing businesses, along with its assets and liabilities, will be transferred to a new unit.

The new unit will include the refining and petrochemical plants and manufacturing assets at RIL’s Jamnagar, Dahej, Hazira, Nagothane, Vadodara, Patalganga, Silvassa, Barabanki and Hosiarpur locations.

It will also include all assets relating to RIL’s ongoing refinery and petrochemical projects that are being commissioned or near completion, the company said.

RIL had officially announced its proposal to transfer its oil-to-chemicals (O2C) business to a separate entity in April.

“The nature of risk and returns involved in the O2C business are distinct from those of the other businesses of RIL and the O2C business attracts a distinct set of investors and strategic partners,” it said in the statement detailing its plan to create the new subsidiary.

“RIL being a listed company cannot issue shares with differential rights (i.e. equity shares with interest linked only to O2C business) therefore, the O2C undertaking has to be transferred into a wholly-owned subsidiary of RIL in which the investors will invest,” it added.

Accordingly this scheme is being proposed for transfer of the O2C business to the subsidiary on a slump sale basis.

In a slump sale, assets are transferred or sold without considering the values of the individual assets or liabilities contained within the undertaking.

“The scheme will become effective from the appointed date…means opening business hours of 1 January 2021 or such other dates as may be approved by board of the parties,” the company said on its website.

The separation of the assets was planned as part of RIL’s target to sell 20% in its refining and chemicals business to Saudi Aramco.

The $15bn deal with Aramco was initially scheduled to be completed by March 2020, but has been delayed

At the company’s Annual General Meeting in July, RIL chairman Mukesh Ambani had said that the company expected to complete the deal with Aramco by early 2021.

Front page picture: A Reliance Industries petrochemicals facility in India
Source: RIL