India’s Reliance Industries has shelved a proposed deal to sell a 20% stake for US$15 billion in its oil refinery and petrochemicals business to Saudi Aramco, and called for its re-evaluation, citing a shift in priorities.
The oil-to-telecom conglomerate said: “Due to the evolving nature of Reliance’s business portfolio, Reliance and Saudi Aramco have mutually determined that it would be beneficial for both parties to re-evaluate the proposed investment in oil to chemicals business in light of the changed context.”
However, it said it will continue to be Saudi Aramco’s ‘preferred partner’ for investments in India’s private sector.
Reliance chief Mukesh Ambani, at an annual general meeting of shareholders in August 2019, announced plans to sell a 20% stake in the oil-to-chemicals business, which comprises its twin oil refineries at Jamnagar in Gujarat, petrochemical assets and a 51% stake in fuel retailing joint venture with BP, to Aramco. The overall valuation of Reliance’s oil-to-chemical unit was $75 billion.
Initially, the deadline set to close the deal was March 2020, but the Covid-19 restrictions hampered due diligence. During this year’s AGM in June, Ambani set a new deadline to close the deal by the end of the year.
The company appointed Saudi Aramco’s chairman Yasir Al-Rumayyan as an independent director on its board. This had generated hope the deal process would be speeded up.
Rumayyan is also the governor of the Public Investment Fund, the sovereign wealth fund of Saudi Arabia that had earlier picked up a 2.32% stake in Reliance’s digital venture Jio Platforms for $1.5 billion.
However, during the same AGM, Ambani also announced a plan to set up one of the largest integrated renewable energy manufacturing facilities in the world. It also set a deadline to achieve net carbon zero by 2035. It is, however, not clear what changed between June and now to opt for a ‘re-evaluation’.
Reliance also decided to withdraw a proposal filed before the National Company Law Tribunal to separate its oil-to-chemical business from the company. Reliance’s new energy businesses are housed in separate subsidiaries and are not part of the oil-to-chemical unit.
After crude prices started falling last year amid the pandemic, Aramco started to balk at the price of the Reliance stake. However, once oil prices started to rise, there was a sense of optimism that the deal would finally go through.
A stake in the Reliance petroleum unit would have given Aramco entry into one of the world’s fastest-growing fuel markets. It would also have given it a ready-made market for half a million barrels per day of its Arabian crude and offer a potentially bigger downstream role in the future.
However, it is not known if the Saudi oil behemoth is interested in Reliance’s new energy business.
On the other hand, Reliance’s urgency for a stake sale in its oil business ebbed out after it received a windfall of more than $27 billion during stake sale in its digital and retail units. Prominent tech giants including Facebook and Google picked up stakes in Jio Platforms.