• Reliance’s oil-to-chemicals business seems to be in the right spot to leverage China’s climate crackdown

    Indian oil-to-telecom conglomerate Reliance Industries (RIL) is expected to announce positive business growth especially in its oil-to-chemicals and telecom businesses for the July-September quarter.

    Analysts expect RIL’s oil-to-chemicals business margins to lift in the coming quarters if China sticks to its climate change goals leading to cut down in their exports of petroleum products.

    A report by Jefferies said it has a positive stance on RIL as its analysts “see potential for 10-12% upgrade to consensus oil-to-chemicals earnings before interest, taxes, depreciation, and amortisation (EBITDA) estimate for FY22 earnings if China sticks to its climate goals till the Winter Olympics in February 2022.”

    China is currently struggling with a severe shortage of electricity, which has left millions of homes and businesses struggling with power cuts including chemical manufacturing companies.

    “With over 50% of its [RIL’s] refinery slate in diesel, RIL’s refining profitability has improved sharply. If these elevated margins sustain till the Winter Olympics in February, RIL’s refining profitability could improve by $0.8 billion over the second half of FY22 earnings,” said a report by Jefferies.

    Currently, the company has four verticals — oil-to-chemicals (O2C) business that houses its oil refineries, petrochemical plants and fuel retailing business, digital services that comprises telecom arm Jio, retail including e-commerce and new energy.

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