Reliance AGM may see more focus on green energy, consumer business

Experts expect the firm to make further announcements in green energy

The 45th annual general meeting (AGM) of Reliance Industries (RIL) may be held in the next few weeks with some experts believing the company may revive plans of an oil-to-chemicals (O2C) demerger, which was shelved last year.

The company may also spell out its future plans for the retail and telecom businesses that operate as separate units, namely, Jio Platforms and Reliance Retail Ventures, respectively. It could also make further announcements in green energy, sector, experts said.

“RIL had decided against proceeding with the demerger of its oil-to-chemicals business last year. But the company could revive the plan this year, given the favourable environment that prevails currently,” G Chokkalingam, founder and managing director (MD), Equinomics Research and Advisory, said. “While crude oil prices have corrected after the Fed rate hike last week, tight supplies remain in focus. Second, the demand for refined products is rising globally,” he said.

Last week, JP Morgan had said that RIL remained among the best positioned to address the need for refined products across the world. “RIL remains among the best positioned refiners globally, given its ability to buy and process arbitrage barrels, a diesel-heavy slate and an export focus,” the brokerage said in its report dated June 16.

Deven Choksey, MD at brokerage KR Choksey, said shareholders were keenly awaiting announcements on the company’s plans to unlock value in retail and telecom. “Shareholders will want to know how the company is looking to unlock value in businesses such as telecom and retail and by when this is likely," he said.

JP Morgan had said in its June 16 report that it saw the company offering no specific timelines with regard to listing of the telecom and retail businesses.

"While higher oil and gross refining margins are a positive, we expected the global tech sell-off to impact RIL’s consumer valuations (for telecom and retail) negatively. With likely higher average revenue per user (ARPU) and further ramp-up of its retail footprint, combined with renewable business, the non-energy business valuations should hold up going forward," the brokerage said.

RIL derives close to 60 per cent of its revenue and nearly 50 per cent of its earnings before interest, tax, depreciation and amortization (Ebitda) from its O2C business. This includes refining, petrochemicals and fuel retail. Retail and telecom, on the other hand, account for 34 per cent of revenue and nearly 45 per cent of Ebitda, according to its financial results for the fiscal ended March 31, 2022 (FY22).

FY22 also saw RIL surpass gross revenue of $100 billion (Rs 7.9 trillion) on the back of its performance in the O2C, telecom and retail segments. New energy presents a further upside for growth in the future, analysts said.

In a recent report, Morgan Stanley had indicated that RIL was on the path towards touching $20 billion in Ebitda by the end of 2022, led by high refining margins, telecom revenue per user rising, global gas market tightening, rising traction on digital commerce and superior petrochemicals spread. The company closed FY22 with a consolidated Ebitda of Rs 1.25 trillion ($16 billion).

The brokerage also said that the company's bet on green energy initiatives was a key monitorable for the future. Last year, RIL, among the largest fossil-fuel companies in the world, had set out to transition into a green energy company by announcing it would invest Rs 75,000 crore ($9.62 billion) in the sector.

“We are launching a new energy business with the aim of bridging the green energy divide within India, and globally,” RIL chairman and managing director (MD) Mukesh Ambani had said at the AGM, held virtually.

This year may see the company press the accelerator button as rival Adani extends its partnership with TotalEnergies. Last week, the two had agreed to invest $50 billion over the next 10 years in India to produce green hydrogen.

As part of the plan, TotalEnergies would buy 25 per cent in a new clean energy company promoted by the Adani group called Adani New Industries to jointly build the world’s biggest green hydrogen ecosystem.

"I certainly think that green energy or renewable energy would be on the cards in terms of key announcements at the RIL AGM this year," Chokkalingam said. "This could be in the areas of solar and wind energy as well as green hydrogen," he added.

Last week a report by the Institute for Energy Economics and Financial Analysis (IEEFA) had said that investment in the renewable energy sector in India had surged over 125 per cent year-on-year to touch a record $14.5 billion in the fiscal ended March 31, 2022.

Reliance and Adani, the report said, were amongst the key contributors to this spike. Adani had picked up SB Energy, a renewable energy company, in a deal worth $3.5 billion, in October last year. Around the same time, Reliance New Energy Solar, a subsidiary of RIL, had acquired REC Solar Holdings for $771 million.