In line with Reliance’s increasing focus on renewables and hydrogen, the Company has decided to put gasification assets into a separate 100% subsidiary.
Key points to note –
- The Gasification project at Jamnagar was set up to repurpose refinery off-gases and produce Syngas to be used for production of olefins at lower costs.
- Syngas is also used to produce hydrogen for consumption in the Jamnagar Refinery.
- The assets have been transferred at book value.
Separate subsidiary allows clear focus and accordingly any future fund raise from the interested investors in that segment.
One can expect lot of restructuring at Reliance in short to medium term given a wide portfolio of businesses that the Company has created in the last decade or so. The traditional Oil to Chemical (O2C) major has now very diversified business interests including telecom, retail, renewables and plethora of other business interests through the start-up investments.
As for now, almost everything is sitting under Reliance Industries and sooner or later value unlocking is bound to happen.
Reliance may slice O2C business to unlock value.
My take – Reliance’s current ROCE and ROE are around 8% that is definitely on a lower side. Unlocking theme is important to separate returns of different businesses and allowing investors to pick and choose. It’s bound to happen soon enough in my personal view.