Reliance Industries (RIL) shares today surged as much as 12% today - its biggest one-day gain in over a decade - to ₹1,302, after chairman Mukesh Ambani at the company's shareholder meeting on Monday announced the Aramco deal, which will help the oil-to-retail-to-telecom group become a zero-debt company. "We have a very clear roadmap to becoming a zero net debt company within the next 18 months that is by 31st March 2021," Ambani said at the company's 42nd AGM. Ambani said Reliance Industries is planning to sell a fifth of its oil-to-chemicals business to Aramco in what would be one of the largest foreign investments in the country.
RIL shares ended nearly 10% higher at ₹1,275, adding over ₹70,000 crore to its market cap.
1) Ajay Bodke, CEO for PMS at Prabhudas Lilladher, said: "Market is going to heartily welcome the seminal announcement by RIL of 20% stake sale in its oil-to-chemical (OTC) business to the world's largest oil company Saudi Aramco. This is arguably India's largest-ever FDI inflow and would help dissipate the gloomy sentiment currently pervading in the economy and stock markets. This program to aggressively pursue deleveraging in businesses such as OTC, fiber and tower and emerge as a zero debt company in the next 18 months will strengthen the consolidated balance-sheet leading to strong valuation re-rating of the stock."
2) The deal with Aramco, which values the business at $75 billion including debt, also includes an agreement for Aramco to sell up to 500,000 barrels per day (bpd) to Reliance's Jamnagar refinery in Gujarat.
3) RIL had net debt of ₹154,478 crore as of March 31, 2019.
4) The stake sale and plans to bring in more investors for its consumer businesses is part of Reliance's push to become a zero net debt company by March 2021.
5) Last week, global oil major BP said it was forging a fuel retailing joint venture with Reliance Industries. Reliance is set to own a 51% stake in the venture and the rest will be held by BP.
6) Reliance Industries will receive ₹7,000 crore from BP Plc, under the deal.
7) The Aramco deal is the latest in a series of moves by Reliance to sell non-core assets, or forge joint ventures, as it seeks to reduce debt.
8) Ahead of the BP deal, Reliance last month announced the sale of the tower assets it owns through an investment trust to Canada's Brookfield Asset Management for ₹25,000 crore.
9) Ambani also said that the investment cycle for Jio is now complete. He also announced the roll-out of 'Jio Fiber' broadband services from September 5, promising free voice calls for life from landlines, 100 mbps minimum broadband speed at subscription starting from ₹700 a month and free HD TV set on a commitment to an annual plan.
10) Analysts remain positive on RIL's effort to trim debt. Gagan Dixit, vice-president at Elara Capital, said: "In near term, it's (Aramco deal) a positive development and would help de-leverage RIL."