Reliance to restructure and repurpose gasification assets to position the company as a first-mover in the hydrogen ecosystem. The transfer, which will be carried out on a slump sale basis, will enable value unlocking in the syngas business with the induction of an investor.
Probal Sen, Senior Vice President at Centrum Broking said, “I think this goes back to the language that was used when they talked about the O2C deal being put on the back burner as well. Very clearly they mentioned that they would be looking at this energy business in a different context, they will be looking at it as one whole pie, including downstream petroleum and the renewable energy initiatives. If I remember the press release also talked about repurposing some of the existing Jamnagar plants to sort of fulfil those green energy aspirations. I think this is step one of that process.”
“Large refining process anyways produces hydrogen, which is called grey hydrogen, which is not really environmentally friendly. But I believe that that is what the intent is to move to first, blue hydrogen, which is slightly cleaner, basically this hydrogen along with carbon capture, and then sort of repurpose and combine these with the green hydrogen initiatives that they are anyway sort of looking to do as a separate factory altogether. So the purpose and the intent very clearly is to cut down on the traditional fuels, and repurpose some of the gas that is produced in the process to sort of move up into greener chemicals, speciality chemicals, as well as produce more of cleaner hydrogen as part of the overall integrated complex that they have.”
From a stock perspective, Sen said, “We currently have a target valuation of around Rs 2,565 with the ‘hold’ kind of rating. The green energy initiatives, we value at about 2.50 times, EV to capital employed, which delivers about Rs 290 a share EV. In the O2C segment, we have always valued at a slightly lower number than the $75 billion EV that was floating around. Our target valuation provides an EV of around 63 billion, which translates to I think around Rs 750 a share.”
On Oil India, Sen said, “Any surprises on either the gas price front from here, or particularly for the second half, or any small green shoots that one sees on production might still drive the price a little bit higher. The valuation despite whatever rally has happened, do leave room perhaps for another 15- 20 percent return from these levels on Oil India.”
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(Edited by : Ajay Vaishnav)
First Published: IST