The proposed reorganisation plan by Reliance Industries Ltd (RIL) to transfer its refining, marketing and petrochemical (oil-to-chemicals) businesses to a wholly owned subsidiary Reliance O2C Limited (O2C) will facilitate participation by strategic investors, according to Fitch Ratings.
“The proposed reorganisation eases the formation of strategic partnerships and stake sales to potential investors focussed on investments in oil-to-chemicals businesses,” the credit rating agency said in a statement. RIL has been in discussions with Saudi Aramco to sell a minority stake in its oil-to-chemicals businesses.
The transfer will be on a “slump sale basis”, subject to attaining the requisite approvals and its consideration will be in the form of long-term interest-bearing debt of $25 billion to be issued by O2C to RIL. RIL’s external debt is proposed to remain with the company.
As RIL moves its oil refining, petrochemical and 51 per cent stake in a fuel retail subsidiary – among other businesses – to O2C, it will continue to hold businesses like textiles and upstream oil & gas, and will act as an incubator for new growth businesses.
Fitch said following the reorganisation, the risk of any cash-flow subordination should be mitigated by RIL’s significant majority control in its key subsidiaries along with its strong liquidity, minimal external debt at the subsidiaries’ levels, and overall low consolidated leverage position.
RIL holds 67 per cent in its digital services and 85 per cent in retail business subsidiaries, and aims to maintain a significant majority stake in O2C, which provides significant control and access to cash flows generated by these businesses.