INSUBCONTINENT EXCLUSIVE:
(RIL)'s consolidated earnings would be lower by 9 per cent while operating cash flow would fall 14 per cent in FY21 following 20 per cent
stake sale in its oil-to-chemical (OTC) business to Saudi Aramco, as per a Morgan Stanley report.RIL plans to sell a 20 per cent stake at an
enterprise value of $75 billion
At the same time, it will source 500 kbpd of oil (36 per cent of its total requirements) from Saudi Aramco."Once completed, we estimate the
stake sale will make RIL's energy business nearly debt-free, but it will lower RIL's FY21 consolidated earnings by 9 per cent and
operating cash flow by 14 per cent," the investment firm said in its report.RIL, in its recent Annual General Meeting (AGM), had announced
agreeing to a non-binding letter of intent from Saudi Aramco regarding proposed investment in its refining, petrochemicals and fuel
marketing business."We upgrade RIL to Overweight after the near 12 per cent decline in the past three months and 8-10 per cent cut in
earnings expectations for FY20 and F21
We believe the expectations are a lot more moderated, and with both refining and petrochemical industry margins touching cash cost quite
quickly in the past quarter, the downside risks are now well flagged," said the advisory note to investors.Noting that while recovery in
energy margins will be slow (especially against the backdrop of weak global demand), Morgan Stanley said it sees support from slowing supply
growth in polyethylene and refining.On the petrochemical industry, it said, oversupply in naphtha markets and weak chemical demand have
This has led industry margins to touch cash cost of $3.5/bbl and has driven run cuts for marginal refiners in China and the US, the research
report from Morgan Stanley said.Get Breaking news, live coverage, and Latest News from India and around the world on
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