It is expected to be a good quarter for the oil to chemicals (O2C) business for Reliance Industries Ltd (RIL) for a couple of reasons. Both its sub branches, oil and gas and oil to chemicals are expected to show a positive uptick from the previous quarter.

One major factor is that crude oil prices are down both on a year on year (YoY) basis and on quarter on quarter (QoQ) basis, 19 percent and 8 percent respectively. Additionally, the Singapore gross refining margins have improved to levels of $8.2 per barrel in quarter four of FY23.

Along with this, the market has seen demand improvement because of Chinese economy reopening. Exports have inched higher as well. This might cap gains as far as product spreads in the petchem segment is concerned.

The petchem and refining should see a sequential improvement, but sector watchers say that the petchem vertical will still be subdued versus historical averages.

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Brokerage house Jeffries thinks that the company will see a 10 percent sequential increase in the O2C business and 7 percent on a YoY basis to come in at Rs 15,249 crore.

If one looks at how O2C has been contributing to overall EBIT, it was at one of the highest levels back in quarter for FY22 at 91.8 percent, it did see a fall from there, but it has been increasing since then, and this time around it will be seeing higher levels of around 80 percent. This is as per ICICI Securities.

It is expected to contribute more to the business this time.

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The company does not report GRM numbers anymore, but there is an expectation that they will improve to $12.8 per barrel, which is an increase both on a YoY and on a QoQ basis.

The upstream segment has been doing well for the company and it will not be an exception this time as well. 5 percent increase on a sequential basis more than 100 percent on a YoY basis is what the upstream oil and gas business will do this time in terms of EBITDA.

In an interview with CNBC-TV18, Probal Sen, Energy Analyst at ICICI Securities said, “If we look at the prospects for the O2C segment, the demand-supply does look to be getting tighter for the next year particularly if the Chinese demand resurgence come sooner rather than later. So, to that extent, I would still expect a recovery on the margins front for O2C.”

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First Published:Apr 20, 2023 4:25 PM IST