Reliance Initiates Oil to Chemicals Business Spin-off with $25B Loan

India’s Reliance Industries Ltd. (RIL) has started carving out its new oil-to-chemicals (O2C) operation into an independent unit with a $25 billion loan from the parent company.

The wholly owned unit’s assets will be funded by the interest-bearing loan, which will be an “efficient mechanism to upstream cash, including any potential capital receipts,” in the unit, according to a company presentation filed with the stock exchanges.

O2C contributed more than 60% in the last financial year to the group’s revenue. Splitting the business will make it easier for RIL to bring in investors and help expedite a proposed stake sale to Saudi Arabian Oil Co.

Creating the unit “facilitates participation by strategic and financial investors for value discovery and unlocking,” Reliance Industries said in the presentation. It expects the separation to be completed by September.

Approvals have been received from the markets regulator and stock exchanges, and the company will seek a nod from shareholders and creditors in the first quarter of the year starting April, it said.

Reliance O2C Limited houses oil refining and petrochemical plants and manufacturing assets, bulk and wholesale fuel marketing, and RIL’s 51% interest in retail fuel joint venture with BP of the UK.

The O2C unit also houses the firm’s Singapore and the UK-based oil trading subsidiaries and marketing subsidiary, Reliance Industries Uruguay Petroquimica SA.

It also houses Reliance Ethane Pipeline Limited that operates a pipeline between Dahej in Gujarat and Nagothane in Maharashtra as well as a 74.9% stake that Reliance holds in the joint venture with Sibur.

RIL owns and operates twin oil refineries at Jamnagar in Gujarat, with a combined capacity of 68.2 million tonnes per annum.

It is also the country’s largest petrochemical manufacturer with units at Jamnagar, Dahej, Hazira, Nagothane, Vadodara, Patalganga, Silvassa, Barabanki, and Hoshiarpur.

The company holds a 66.6% stake in the KG-D6 block where it is investing about $5 billion in developing a second set of gas discoveries along with BP.

It also has a similar stake in the NEC-25 block in the Bay of Bengal and operates two CBM blocks in Madhya Pradesh. These upstream assets are not part of the O2C unit.