Why is Saudi Aramco looking to now partner with Adani Group, after deciding not to go ahead with the Reliance partnership?

It now looks like the Adani Group is aggressively courting Saudi Aramco to join hands with the Adani group to explore partnerships in India. Adani may also look to bring Aramco operations into India by taking a stake in Saudi Aramco and facilitating their entry into India in a big way. The original plan to take 20% stake in Reliance O2C Ltd by Saudi Aramco was based on that premise. However, that deal has been shelved now.

Gautam Adani has already held preliminary discussions with the Saudi Aramco group on a range of potential cooperation and joint investment opportunities with Saudi Aramco. Adani group is also looking at partnering with their investment arm, Public Investment Fund. Adani may be even buying part of the PIF stake in Aramco, although details are still awaited. It could most likely be an equity swap deal and would include chemicals and green energy.

Adani has also been looking at tie-ups with SABIC, the chemicals subsidiary of Aramco. PIF, incidentally, happens to be the Saudi sovereign wealth fund. They may also draw PIF to invest in Indian infrastructure. However, the actual nature of the cooperation is yet to evolve over time. Clearly, Saudi Aramco would be more than interested in being a part of the story of one of the fastest growing energy markets in the world.

Recently, Saudi government had transferred 4% stake in Saudi Aramco to the Public Investment Fund (PIF). The 4% stake is valued at close to $90 billion and that is something Adani would want to compensate via swap deals that did not entail the outflow of cash. PIF has also been looking at ways and means to monetize that holding as it is looking to raise funds for a much broader investment portfolio of global infrastructure assets.

Adani is today India’s third biggest conglomerate in terms of market capitalization after Tatas and Reliance. The Adani group spans business ranging from ports, power, renewable energy, airports, coal trading and data centres. It is firing on all cylinders and has recently signed up with POSCO of South Korea to explore opportunities in India. This will also include setting up a green steel mill in Gujarat with investment of $5 billion.

However, it is not clear how the multiple relationships will be managed. For instance, PIF has already done several deals in India including buying stakes in Reliance Retail, its wireless arm and its fibre-optic network assets. Interestingly, the chairman of Saudi Aramco, Mr. Al-Rumayyan, is also on the board of Reliance Industries. Rumayyan is also a member of the board of the Public Investment Fund (PIF).