Reliance to sell 20% stake in oil-to-chemicals biz to Saudi Aramco


  • 12 Aug 2019
Credit: VCCircle

Reliance Industries Ltd plans to sell a 20% stake in its oil-to-chemicals business to Saudi Aramco, as the company led by billionaire Mukesh Ambani continues to ink deals with foreign partners to pare debt.

The company intends to divest the stake in its refining, petrochemicals and fuels marketing businesses at an enterprise value of $75 billion, Ambani said on Monday.

Reliance is the operator of the world’s biggest refinery, at Jamnagar in Gujarat, and Ambani’s statement puts the valuation of the stake that the world’s top crude producer is buying at $15 billion.

“This would be one of the largest foreign investments ever made in India,” chairman Ambani told Reliance shareholders at an annual meeting.

The proposed deal, which is subject to due diligence, also involves Saudi Aramco supplying 500,000 barrels of crude oil per day to the Jamnagar refinery on a long-term basis, Ambani said.

Ambani also said that Reliance has separately signed a pact with BP Plc to form a joint venture in the petroleum retailing business. BP will have a 49% stake in the joint venture while Reliance will hold 51%. “Reliance will get Rs 7,000 crore (about $1 billion) from BP for this transaction,” he said.

The announcements add to the deals Reliance has signed over the past few months to sell stakes in various businesses to cut debt. Last month, it agreed to sell a stake in its telecom tower arm to Canadian investment firm Brookfield Asset Management Inc. for Rs 25,215 crore ($3.66 billion). Previously, Brookfield had signed a deal to buy a gas pipeline from companies controlled by Ambani for $1.9 billion. Reliance is also looking to sell a stake in its optic fibre business.

Ambani said that Reliance had net debt of Rs 1,54,478 crore ($21.7 billion) at the end of March 2019 and that it aims to become a “zero net debt company” by the end of March 2021.

Cloud infrastructure, internet businesses

In another significant development, Reliance’s telecom services arm has joined hands with Microsoft Corp to offer cloud infrastructure to companies.

Under the 10-year pact, Reliance Jio Infocomm Ltd and Microsoft will offer connectivity, computing, storage solutions, and other technology services and applications, Ambani said.

Jio and Microsoft aim to enhance the adoption of new technologies such as data analytics, artificial intelligence, blockchain, Internet of Things and edge computing among small and medium enterprises, he added.

As part of this agreement, Jio will set up data centres across India and Microsoft will deploy its Azure cloud platform in these data centres to support Jio’s offerings.

The first two data centres, which can house IT equipment consuming up to 7.5 MW of power, are being set up in Gujarat and Maharashtra. These are targeted to be fully operational in 2020, Ambani said.

The company will also launch super-fast internet next month, a worrying development for broadband service providers. Jio upended India’s telecom industry with its launch three years ago and now already has about 340 million subscribers.

The company said its GigaFiber broadband services will include fixed-line telephone calling, access to television channels and video conferencing with prices starting at Rs 700 a month.

Reliance’s moves into the technology sector and its new internet service are part of the company’s efforts to expand its consumer-facing businesses that also include a retail chain and diversify from its core oil refining and petrochemicals businesses.

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