Reliance | Reliance share price | Sanjiv Bhasin: Expect some rear

Reliance and Saudi Aramco have said that they are re-evaluating the proposed investment in the O2C business. When the deal was first talked about, the main aim was to reduce debt for RIL. But then, a whole host of other deals came in and debt was taken care of. So what does this development mean for Reliance O2C business?
Many things have changed in this two-year scenario. In August 2019, Reliance was not even a $100-billion company. We had not expected how the after-effects of Covid and the digital part would play out. Nobody expected the type of money that Reliance managed to raise through savvy investors in this lockdown and finally, renewable energy is turning out to be the real focus of Reliance. Plus, at that time, crude was at $60 and both the companies were re-evaluating what the after effects of EVs is going to be.

So, it is likely that the dynamics of the deal are going to see a sea change. All in all, it is a very interesting time. Reliance is no longer in need of the 20% divestment which they originally envisaged in 2019. Their capital ratios are very strong and the action is now all on digital and the new green energy space in which they are very long term bullish over the next three-five years.

So in the near term, it is something which the market may have already priced in. It is slightly positive for Reliance, given that their OTC business, particularly the petrochemicals, are seeing extremely good traction while globally the reopening is very strong.

How do you see the valuation coming in for the O2C business for Reliance now?

Aramco and other large petrochemical or energy players are now looking to buy a piece of ONGC’s business. It tells us that this business is very strong. The underlying asset of reopening is very strong and the demand which we have seen from commodities to soft commodities to metals is being extremely positive. So this will set the ball rolling amongst the new re-evaluation parameters.

We must also realise that Reliance is now inching its way to be a $200-billion company. Tesla is worth a trillion dollars. So everyone is waking up to the new regime of EVs and green energy and OTC remains a very strong business. But it is no longer the dominant business which it was, which Reliance launched with Patalganga and Jamnagar. The new wave in town is going to be green energy and digital.

Does this in any way talk about investors? From an investor point of view, these deals were priced in, foreseeing some cash flow. In the short term, could we see some problem coming in for Reliance in terms of investors?
It is a plus for Reliance, given that the stock price was not even Rs 1,400 when this deal…