Reliance Industries could turn into a holding company: CreditSights

Reliance Industries, India's biggest company by market value, could become a holding company (holdco), with majority stakes in independent entities that operate the major business verticals, said Fitch-owned CreditSights in a report Monday.

Under the current corporate structure, RIL acts as both a holding and an operating company. The oils-to-chemicals (O2C) and upstream oil and gas (O&G) segments are wholly owned and held directly under RIL, while the telecom, retail and new energy segments are held under unlisted operating companies.

"We believe such a structure (holdco) would facilitate a clearer distinction between each divisions' assets and cash flows, unlock stakeholder value, open more diverse funding channels, demarcate capital allocation and facilitate closer oversight since each listed vertical will have its own set of diverse shareholders and possibly Board of Directors," CreditSights said.


It added that its expectation is underpinned by the management's communication during RIL's 2019 AGM that the company aims to list the retail and telecom businesses over the next five years; RIL was previously exploring plans to hive-off its O2C business into a standalone unit with Saudi Aramco taking a 20% stake in the new unit and that RIL recently executed the demerger and listing of its financial services arm, Jio Financial Services.

However, the flip side could be that RIL and its debt/bonds would become structurally subordinated to the debt at the operating subsidiaries, and will become more reliant on dividend upstreaming to service its debts.

"We are inclined to think that RIL will remain a family owned/controlled company after Ambani hands over the reins of the individual businesses to his children," CreditSights said.