Reliance Industries Ltd (RIL) gains nearly 2 percent after announcing oil-to-chemical (O2C) business spin-off into an independent 100 percent subsidiary, which will constitute the refining, petchem and fuel retailing businesses. Harshvardhan Dole, Vice President Institutional Equities at IIFL, shared his views and outlook.

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He believed that this is a step towards inducting a strategic investor into the O2C business. "In our view, when the strategic investor is inducted into this SPV, it should lead to reasonable amount of value unlocking," he said.

He believed that at current levels, the stock is building in an EV of close to USD 62-63 billion for the O2C business and further value unlocking can lead to upside provided the O2C investor comes in at a valuation, which is much more than this.

From a cash flow generation perspective nothing changes. “Improvement in fundamentals bodes well for the overall cash flow generation. Commodity consumption improvement is giving a tailwind to RIL's commodity business which should lead to significant earnings growth over the next two years. So as such the cash flow generation from O2C business should continue to remain healthy which should support strategic investor paying a premium for the O2C business,” he said.

The opportunity landscape for renewables is quite significant, he said.

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(Edited by : Priyanka Rathi)

First Published:Feb 23, 2021 11:30 AM IST