RIL (Reliance Industries Limited) is an Indian corporate conglomerate with headquarter in Mumbai. Reliance owns entities in energy, petrochemicals, textiles, natural resources, retail, and telecommunications all over India. Reliance Industries (RIL) was the first Indian private sector business to make the Fortune Global 500 list in 2004. After India's independence, Reliance Industries has become the country's most successful corporate success tale. Reliance, which was established in 1958 by Dhirubhai H. Ambani, now has holdings in energy production and distribution, telecommunications, and capital finance. These activities were divided into a separate business regulated by Anil Ambani after a public feud between Mukesh D. Ambani and his younger brother Anil. Recently, RIL proposed hiving off its Oil to Chemicals (O2C) business into an independent subsidiary. Here are some highlights from the demerger. The reorganization leads to RIL establishing the O2C company as a single subsidiary and supporting corporate partnerships and new investors in the company. RIL voted in favour of the resolution in stock exchange filings for 99,99 percent of shareholders who participated by video-conference. Although the agreement has been accepted by a 100% of the secured creditors, 99.99% of the non-secured creditors voted for it. The implementation of Reliance O2C Limited (O2C) will allow a focused search of opportunities across the value chain oil-to-chemicals and will boost efficiencies by means of a self-sustaining capital structure and a committed bunch of people for management. A few aspect changes are as a result of this announcement. One important component is that Reliance will essentially move assets to its subsidiary in exchange for a $25 billion loan. This is a loan that Reliance is going to profit from. This will put to rest any doubts the Reliance holding company's shareholders may have about the company's earnings. Given the fact that a $25 billion debt has been recorded in the books, I would expect that $15-20 billion in O2C funds will finally be recorded in the books of the parent company — Reliance Industries. The transfer of twin refineries in Gujarat, petrochemical sites in several states, and a 51 percent stake in the fuel retailing market to O2C will be done on a 'slump sale basis,' with the required approvals anticipated, by September. Upstream oil and gas production fields such as KG-D6 and the textile company, though, will not be included in the new unit, in which it plans to hold a large majority interest. The move will be paid for with a $ 25 billion long-term interest-bearing loan that O2C will issue to Reliance Industries Ltd. (RIL). RIL's external debt is proposed to be owned entirely by the company. Only the upstream oil and gas exploration and production sector, financial services, group treasury, and legacy textile companies will be housed by RIL, which was established by Dhirubhai Ambani in the late 60s. RIL will also serve as the group's holding company. RIL is in negotiations with Saudi Arabian Oil Company (Saudi Aramco) to sell 20 percent stake in its O2C businesses, which in case is successful, would help the company to reduce the level of debts even further. The upcoming RIL O2C will include RIL's refining, marketing, and petrochemicals businesses, as well as its crude refining complex. The company will have 1.4 million barrels a day of refining capability and 38.4 million tonnes of petrochemical processing capacity. In India, it will have nine production units and three in Malaysia. My assumption is that Reliance will launch new financials vertical, and that this will be where an interesting play will appear. RIL's New Energy & New Materials (composites and carbon fibre) business, which focuses on clean and green energy generation, will benefit from the demerger. When all factors are taken into consideration, it should be clear that this demerger deal represents a very good valuation proposition for Reliance stock. Thank you.
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