RIL to reap project gains

Mumbai: Reliance Industries Ltd (RIL) is likely to see a cash-flow boost in 2018 as projects of over $40 billion start to deliver even as its capex will fall, brokerage firm CLSA said on Wednesday.

The brokerage said in a report that the stabilisation of the refinery off-gas cracker (ROGC) and petcoke gasification projects would boost the company's EBITDA.

The downstream expansions, called J3, are likely to fully stabilise in early 2018 and the benefit would start flowing in from the next financial year (2018-19).

On Tuesday, RIL announced the commissioning of the world's largest refinery off-gas cracker complex at Jamnagar in Gujarat.

The cracker unit will use the refinery residue to produce feedstock used in making petrochemicals.

RIL is also close to commissioning a petcoke gasification plant, which will convert coal and coke, the low-cost fossil fuels, into gas.

According to CLSA, the monetisation of the two plants will boost the operating income of the company but full benefits will occur only in the next financial year.

"Although it has indicated a potential annual benefit of $2-2.5 billion, we model a smaller amount of $1.8 billion from these two projects. Stabilisation of these projects would give a big boost to oil and gas earnings over 12-15 months," it said.

The CLSA observation on RIL was well received by the the bourses with the scrip gaining around a per cent to close at Rs 916.35 on a day the benchmark Sensex ended lower by over 18 points.

The latest expansion in its core business comes just days after RIL's arm Reliance Jio Infocomm (Jio) acquired the wireless assets of Reliance Communications (R-Com) for an estimated Rs 25,000 crore.

CLSA pointed out that RIL's telecom business has achieved a critical mass with a subscriber base of around 160 million. It has also cornered nearly 80 per cent of the 4G smartphone base. The 4G smartphone base will expand as users replace their existing smartphones.

"We expect Jio to get to 100 million 4G feature phones by March 2019," CLSA said. It expects the company, which disrupted the telecom sector with its offer of free voice calls and cheap data, to monetise its industry leading capacity.


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