According to analysts’ estimates, the petrochemicals segment has posted operating profit of around Rs 30,000 crore in the last fiscal. The new investment will increase capacity in the O2C segment, including the world’s largest single train PTA plant, 3 million metric tonnes per annum (MMTPA) capacity, an MMTPA new capacity for PET and polyester, and a 1.5 MMTPA PVC plant. This capacity addition will be completed by 2026.
also plans to build one of the largest capacities of carbon fibre 20,000 MMTPA in the world based on acrylonitrile feedstock by 2025 at Hazira facility in Gujarat. The market for carbon fiber composites is growing rapidly due to its use in electric vehicles and renewable energy.
RIL will invest around $14-16 billion in capital expenditure every year for the next three years, which will be almost double compared to the previous two financial years. The Street currently sets the Enterprise Value (EV)/EBITDA at eight for the petrochemical business, which contributes one-third of the total fair value of the O2C business.
The capital expenditure on telecom will be around $25 billion, of which $11 billion will be on the purchase of 5G spectrum. With super-efficient 700 MHz spectrum aided by 3.5 GHz midband, Jio is hoping to launch standalone 5G services in metro areas by October. Jio’s operating profit could potentially double in the next three years as compared to FY22.
While the free cash flow is expected to be impacted by large capex in the current fiscal, this will translate into value addition with the introduction of new capacities. The stock of RIL has outperformed Nifty 50 by 13% in the last 12 months. The trend is likely to continue considering the future revenue visibility.