At Reliance’s 42nd annual general meeting on Monday, Chairman Mukesh Ambani, India’s richest man and the owner of around 47% of the shares, announced that the world’s largest oil producer, Saudi Aramco, will acquire a 20% stake in Reliance’s oil-to-chemical business for 1.06 trillion rupees (US$15 billion).
Last financial year Reliance group had a net debt of 1.5 trillion rupees ($ 21.12 billion). The Aramco deal represents aggressive planning to bring down the mountain of debt to zero by March 2021. After the announcement, the shares of Reliance surged by nearly 10% in early trading on the National Stock Exchange on Tuesday.
The oil-to-chemical business will be a separate division, which will also hold a 51% stake in the petro-retail business. Aramco will have a 20% stake in the division, which will later be carved into a subsidiary. Aramco thus sees the entire business as having an enterprise value of $75 billion.
As part of the deal, Saudi Aramco is also expected to supply 500,000 barrels per day of crude oil on a long-term basis to Reliance’s refinery at Jamnagar in Gujarat state.
Earlier this month, Reliance entered into a joint venture with UK based energy giant BP Plc to sell a 49% stake in its petroleum retailing business for 70 billion rupees ($990 million).
As part of its debt reduction plan Reliance is seeking global partners for its retail and telecom businesses. The company also plans to unlock value in real estate and financial investments.
Ambani predicted that Reliance group’s telecom unit Reliance Jio and retail venture Reliance Retail would soon account for 50% of the company’s earnings.
After creating a major disruption in the telecom sector in 2016, Reliance Jio is now planning to do the same in the broadband and cable television space.
Ambani announced that Jio Giga Fiber will begin services from September 5. It will offer free voice calls for life from landline phones, high-speed broadband of minimum speed of 100 Mbps, free high definition TV and dish. The monthly rental plan will range from 700 rupees to 10,000 rupees.
“Even the most basic Jio Giga Fiber will start at 100 Mbps at the lowest end. We have plans to go all the way to 1 Gbps. We are pricing our plan at one-tenth of global rate to make it accessible for every home,” Ambani said.
From mid-2020, the premium Jio Giga Fiber customers will also get to watch new movies on the day of release, Ambani said. This is expected to create a major churn in the television distributor market.
The company also announced that it has entered into a long-term alliance with Microsoft to launch cloud data centers. Jio will set up a network of such centers across India, powered by Microsoft’s Azure cloud platform.
To invest in Kashmir
Ambani has announced that Reliance group will make several announcements related to future investment in thwo newly formed Union Territories, Jammu and Kashmir, and Ladakh.
This announcement comes days after the Indian government abrogated Article 370, which had granted special rights to Jammu and Kashmir state. He said his company will set up a special task force focused on making investments in that region.