Reliance Industries gives Detailed Plan to Spin-off O2C Assets

Reliance Industries Ltd (RIL) has released a detailed plan on spinning off its oil-to-chemical (O2C) business into a separate subsidiary on Sunday, according to a report by The Telegraph.

It has come up with a detailed scheme of arrangement to transfer the undertaking to the O2C subsidiary through a slump sale, which is likely to be presented to the National Company Law Tribunal (NCLT) for approval.

At its annual general meeting in July, RIL chairman Mukesh Ambani had disclosed that they expect to complete this process of spinning off into a separate subsidiary by early 2021.

Though a proposed deal with Saudi Aramco in the 02C business did not make much progress since its announcement last year, there has been some ray of hope recently with Aramco indicating that it is doing a due diligence on picking up a stake.

According to the scheme of arrangement, the transferee company, or the O2C subsidiary, will be Reliance O2C Ltd. Slump sale is the sale of an undertaking on a going concern basis for a lump sum consideration without values being assigned to the individual assets and liabilities.

Explaining the rationale for the divestment, RIL said that the nature of risk and returns involved in the O2C business are distinct from those of its other businesses and the O2C business attracts a distinct set of investors and strategic partners.

RIL added that it has been exploring various opportunities to bring in strategic and other investors in the O2C business and that investors have expressed interest to make an investment.

“RIL cannot issue shares with differential rights (equity shares with interest linked only to O2C Business) to the investor(s). Therefore, the O2C undertaking has to be transferred into a wholly owned subsidiary of RIL, in which the investor(s) will invest,” it added.

The businesses which will go to the subsidiary include refining, petrochemicals, fuel retail (the majority interest of RIL), aviation fuel and bulk wholesale marketing businesses.

Some of the assets that will go to the O2C undertaking are the refining and petrochemicals plants and manufacturing assets at RIL’s Jamnagar, Dahej, Hazira, Nagothane, Vadodara, Patalganga, Silvassa, Barabanki and Hoshiarpur units.

Also to be included in the subsidiary are a 51 per cent equity interest in the petroleum retail joint venture with BP; a 100 per cent equity interest of RIL in each of Reliance Global Energy Services (Singapore) Pte Ltd and Reliance Global Energy Services Ltd (UK) (trading subsidiaries), Reliance Industries Uruguay Petroquimica S.A, Reliance Ethane Pipeline Ltd; and a 74.9 per cent equity interest of RIL in Reliance Sibur Elastomers Pvt Ltd (a subsidiary of RIL and joint venture between RIL and Sibur Investments AG).