InvestorQ : What happened to the deal between Reliance Industries and Saudi Aramco? Is the deal still on or has been put off?
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What happened to the deal between Reliance Industries and Saudi Aramco? Is the deal still on or has been put off?

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1 month ago
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In fact, both Reliance and Saudi Aramco in their last news release had confirmed that the deal was in the backburner for reconsideration and had not been cancelled. So as of now the deal is well and truly on. In fact, Credit Suisse, has expressed confidence that Saudi Aramco may revive their oil deal with Reliance if oil prices stayed above $50/bbl.

The deal between dates back to the last quarter of 2019, before the COVID affliction actually set in. Back then, RIL and Saudi Aramco had announced an agreement wherein RIL would sell 20% of its stake in the Oil to Chemicals or O2C business in Reliance Industries to Saudi Aramco.

The consideration for the sale of 20% was fixed at $15 billion, which would have valued the entire O2C business of Reliance at $75 billion. It must be noted here that the O2C business of RIL, as defined in the initial agreement between RIL and Saudi Aramco, does not include the upstream oil extraction business, gas prospecting and oil marketing JV with BP.

However, things changed drastically when COVID struck. Due to the global contraction in demand and income levels, crude prices had crashed sharply. Brent fell to single digits in April 2020 and WTI Crude even briefly dipped into negative territory. At that point, Aramco had expressed second thoughts about the valuation. That is where the deal got stuck.

RIL held on to its opinion that the fall in oil prices was temporary and hence there was no question of changing the long term economics of the deal. When Aramco had started delaying, RIL opted to sell its stake in Jio Platforms and Reliance Retail to global investors. However, it looks like Aramco wants the deal now that oil has bounced, RIL is zero net-debt and there is supplementary value in retail and digital. But, is RIL keen, is the question?

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