RIL to Rebalance O2C Business, Focusing on Domestic Buyers Amid Export Challenges

Reliance Industries Ltd. (RIL) is adjusting its oil-to-chemicals (O2C) business strategy to give more importance to the domestic market. This decision comes in response to increasing demand from sectors such as agriculture, automotive, infrastructure, and e-commerce for its key products, particularly polymers. The adjustment is necessary as global market volatility has affected RIL's export-oriented operations.

RIL's Revenue Challenges and Future Strategy

The O2C segment of RIL is significant, accounting for over 60% of the company’s total revenue. However, the segment reported a 4% decline in revenue sequentially, falling from ₹1,55,580 crore to ₹1,49,595 crore, primarily due to weaker exports. Export revenues decreased from ₹70,631 crore in the previous quarter to ₹67,672 crore.

V Srikanth, RIL's Chief Financial Officer, mentioned during a recent analysts' call that the company aims to concentrate on high-growth domestic markets and effectively allocate capital towards projects that ensure sustained profitability. He highlighted that the demand-driven sectors have shown growth rates of 6–8%, helping RIL achieve better utilization of its production facilities compared to competitors.

Investments to Enhance Domestic Operations

Srikanth emphasizes RIL's strategy of investing at the right times, particularly during market lows, to capitalize on reduced project costs. He asserts, "Our commitments to scale, flexibility, integration, and cutting-edge technologies will continue to guide our investments, enabling us to maintain a competitive edge."

The company is investing in an integrated vinyl chain with a capacity of 1.5 million tons per annum (MTPA) in Polyvinyl Chloride and Chlorinated Polyvinyl Chloride, materials essential for plastic piping. This expansion aims to fill India's existing gap of approximately 2–2.5 MTPA, potentially elevating RIL's standing in the global market from 24th to the top 10.

Additionally, RIL plans to increase its virtual ethane pipeline capacity from North America by 50%, enhancing its competitive position. The addition of three large ethane carriers to its existing fleet of six is also in the pipeline.

Moreover, the company is establishing a specialty polyester capacity of 1 MTPA and a PTA capacity of 3 MTPA to meet burgeoning local demand.

Reliance, O2C, Exports