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RIL has a breakup

RIL has a breakup

its $15 billion stake sale deal with Saudi Aramco was called off, pushing the stocks down
November 26, 2021
5 min read
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its $15 billion stake sale deal with Saudi Aramco was called off, pushing the stocks down

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in June 2021, Reliance Industries had announced its $10 billion investment plan to go green and eventually become a net carbon zero company by 2035. just five months later, it called off its “not-so-green” deal with oil major Saudi Aramco. a mere coincidence? 

in 2019, for its oil to chemical (O2C) business, RIL had entered a $15 billion global deal with Saudi Aramco at a $75 billion valuation. the world’s largest oil producer, Saudi Aramco, was to buy a 20% stake in the O2C unit of India’s largest private company, Reliance Industries. 

two years later, their priorities have changed. RIL and Saudi Aramco have scrapped the deal that would have given the Middle-East firm a strong foothold in the country.  Indian stock market participants bore the brunt, with the stock falling 4% and hitting an intra-day low of Rs 2,356 per share. 

in a single day, nearly $9 billion was wiped off from RIL’s market cap. JP Morgan said that the deal being called off could be a “sentiment-negative” for the company’s stock price. however, it said that RIL's deleveraging strategy will ensure that the impact is limited in the long run.

so, what went wrong?

in an official statement, RIL said that there have been changes in their business. the conglomerate has made plans to develop a green energy complex in Jamnagar, Gujarat. under this, RIL will also have a fuel cell factory for converting hydrogen into motive and stationary power as part of the net-zero commitment of the group.

the Mukesh Ambani led group said that since their plans for the O2C (oil to chemical) business have seen significant changes in the past 24 months, the deal with Saudi Aramco is on the back-burner. 

even as the current deal was being worked out, there were reports of Saudi Aramco being interested in Reliance’s oil and petrochemicals business. but neither of them fructified. 

is the deal still on the table?

Dalal Street was factoring in the completion of the Aramco deal into RIL stock price. there was a ray of hope when RIL inducted Saudi Aramco's non-executive  chairman, Yasir Al-Rumayyan, as an independent director on its board. 

it may not be a complete full-stop yet. credit Suisse said that investors weren’t prepared for the deal to be called off and added that it won’t go through in the current form.

RIL claims that their partnership continues. it said that they will continue to be Saudi Aramco’s preferred partner for investments in the private sector in India. the Indian oil major is also eager to collaborate with Saudi Aramco and its sister entities for investments in Saudi Arabia.