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Reliance Industries shares fall nearly 5% as COVID-19 hits oil business

January 27/2021

MOSCOW (MRC) -- Shares of Reliance Industries Ltd fell as much as 4.7% in early trade on Monday after the Indian conglomerate posted a sharp drop in quarterly revenue from its dominant oil-to-chemicals business, reported Hydrocarbonprocessing.

Reliance, which operates the worlds largest refining complex, said on Friday revenue from its oil-to-chemicals division fell nearly 30% in the three months ended Dec. 31.

Total revenue slid 21% to 1.24 trillion rupees, and the company said its operations and revenue during the period were impacted by the COVID-19 pandemic.

Reliance, led by billionaire Mukesh Ambani, has built leading consumer-facing businesses in recent years to diversify away from its mainstay energy arm, but a coronavirus-driven slump in fuel demand has weighed on the Mumbai-headquartered groups recent results.

RILs cyclicals business reporting has become opaque, with no disclosures on gross refining margin (GRM) data this time around, BOB Capital Markets said in a note over the weekend.

We need to see earnings traction to justify the recent surge in stock price as the rally factors in positives from debt reduction. O2C (the oil to chemicals business) earnings growth remains elusive in the current pandemic-led uncertainty, the brokerage added.

Reliance, which did not share the GRM, announced a reorganisation on Friday, according to which it now houses its oil refining, fuel retailing and petrochemicals operations together.

Reliance shares gained about 5.8% last week in the run-up to the results but were flat for this year after a more than 32% gain last year.

The company raised about USD26 billion last year from investors like Google and Facebook for its digital and retail arms.

As MRC informed earlier, in September 2020, RIL released a detailed plan to carve out its oil-to-chemicals business into a separate entity for a potential stake sale. As per the scheme, RIL's O2C assets, including its refining, petrochemicals, fuel retail (majority interest only) and bulk wholesale marketing businesses, along with its assets and liabilities, will be transferred to a new unit. The new unit will include the refining and petrochemical plants and manufacturing assets at RIL's Jamnagar, Dahej, Hazira, Nagothane, Vadodara, Patalganga, Silvassa, Barabanki and Hosiarpur locations.

It will also include all assets relating to RIL's ongoing refinery and petrochemical projects that are being commissioned or near completion, the company said. RIL had officially announced its proposal to transfer its oil-to-chemicals (O2C) business to a separate entity in April.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

Reliance Industries is one of the world"s largest producers of polymers. Thus, the company produces among others polypropylene, polyethylene and polyvinyl chloride.
Author:Margaret Volkova
Tags:PP, PE, crude and gaz condensate, homopolymer PP, propylene, HDPE, ethylene, petrochemistry, Reliance Industries, India, Russia.
Category:General News
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