Reliance Industries (RIL) has made significant progress on the sale of a minority stake in its oil-to-chemical division to Saudi Aramco. According to a report by Bloomberg, Aramco officials and bankers on the deal have been working at Reliance's offices in Mumbai for due diligence this month.
The report, citing sources, said both the parties are trying to overcome differences over the deal's structure, which had stalled the process last year. However, the sources added that deliberations are still going on and the talks are far from final; in fact, the discussion could still fall apart.
RIL's move to sell 20 per cent minority stake in its oil-to-chemical division was first announced by Mukesh Ambani in August, 2019. RIL's oil business is valued at $75 billion and hence, the 20 per cent stake sale would be worth $15 billion. This would be the largest transaction in India since Flipkart's acquisition by Walmart for $16 billion in 2018.
Ambani had also announced that his company was looking to close the deal by March 2020. However, at the current pace, that is unlikely to happen.
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Reportedly, now Ambani is eyeing to sign the binding agreement before the next annual shareholders meeting, which is due to take place before the end of September.
According to a recent report by market analyst firm Bernstein, RIL seeking partnership with Saudi Aramco, valued to be the largest oil company in the world, signals expansion rather than retreat as growth opportunities are expected to boost the petrochemical and refining vertical. "Reliance has pivoted away from energy to the new economy. But energy still accounts for 64 per cent of EBITDA. While RIL has divested stakes to BP and Aramco, we expect RIL to grow their petrochemical & refining business given the secular growth opportunities," it said in a report.
"Aramco's investment is to secure market access and growth. While refining is a cash cow for the business, we believe that there are significant opportunities for petrochemical expansion ahead given demand growth and synergies with refining," Bernstein said.