The 45th annual general meeting (AGM) of Reliance Industries (RIL) will be held virtually on August 29, the company has informed stock exchanges. While the AGM notice and the annual report for 2021-22 (FY22) have not been released yet, some experts believe that new energy and 5G will be in the spotlight at the meeting. At last year’s AGM, RIL had announced a Rs 75,000-crore investment over three years in green energy as part of its new energy push.
Deven Choksey, managing director at brokerage KRChoksey, says this investment could be enhanced in view of growing competition and the shift to sustainable sources underscored by the government.
The Energy Conservation (Amendment) Bill, 2022, tabled in Parliament last week, proposes a mandatory threshold for consumption of green fuels such as green hydrogen, green ammonia, and biomass in all industries. RIL had said earlier it would bring down the cost of green hydrogen to $1 per kilogram in under a decade. Choksey believes this target could be advanced as rivals, such as Adani New Industries, plan to invest over $50 billion (Rs 3.9 trillion) in the next 10 years in green hydrogen.
On 5G, Reliance Jio is considering plans to offer services in nine cities in the country by January 2023, starting with Delhi and Mumbai. Rival Bharti Airtel has already indicated it will roll out 5G services by the end of August, increasing competitive intensity. Analysts expect a slew of announcements by RIL pertaining to 5G enterprise and consumer mobility solutions at its upcoming AGM.
At the same time, the company may spell out its future plans for its retail and telecommunication (telecom) businesses. The two verticals operate as separate units, namely Jio Platforms and Reliance Retail Ventures, respectively.
While brokerage JPMorgan had said recently it did not expect the company to give concrete timelines on initial public offerings of its retail and telecom businesses, it could offer some roadmap for the future.
Analysts also believe the company may revive plans for an oil-to-chemicals (O2C) demerger, which was shelved last year. “RIL had decided against proceeding with the demerger of its O2C business last year.
But the company could revive the plan this year,” says Chokkalingam G, founder, Equinomics Research & Advisory.
“While crude oil prices have corrected recently over global slowdown concerns, tight supplies remain in focus,” he adds.
In an earnings call after its June quarter results last month, the RIL management had said that oil demand would average 99.2 million barrels per day in 2022. This would be higher by 1.7 million barrels per day versus last year, keeping refining margins high, even as overall refining capacity across the world remains constrained.
RIL had benefited from this trend of high refining margins in the April-June period, which had touched $22-25 per barrel in the quarter for RIL – more than double the average of around $10 per barrel the company had done in previous periods.
Gross refining margin is what a company makes from turning every barrel of crude into fuel. In the past few weeks, this benchmark of profitability for crude oil refiners has fallen sharply, bringing most oil companies, including RIL, into sharp focus.
The benchmark Brent crude price, too, has fallen below $95 to a barrel amid demand concerns. But analysts at S&P Global Commodity Insights see this as a short-term blip, since spare refining capacity is low. This trend will benefit refiners like RIL, observe analysts. RIL, for the uninitiated, derives close to 60 per cent of its revenue and nearly 50 per cent of its earnings before interest, tax, depreciation, and amortisation (Ebitda) from its O2C business. This includes refining, petrochemical, and fuel retail.
Retail and telecom account for 34 per cent of revenue and nearly 45 per cent of Ebitda, according to its financial results for the financial year 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.