India's Reliance sees shares fall after slamming brakes on US$15b Aramco deal

[BENGALURU] Shares of Reliance Industries fell 4.2 per cent on Monday (Nov 22) as India's largest firm halted a stake sale in its oil-to-chemicals business to Saudi Arabia's Aramco and pulled back from a potential spinoff of its most profitable unit.

The move to monetise its oil business 2 years ago by selling a 20 per cent stake for roughly US$15 billion to the world's biggest oil exporter was part of its plan to cut the overall debt, which stood at 2.88 trillion rupees (S$52.8 billion).

But over the last 2 years, while the due diligence was on, Reliance became net-debt free by selling stakes at its digital unit Jio Platforms to global companies, including Meta Platforms and venture capital arms of chipmakers Intel and Qualcomm.

Meanwhile, as the global pandemic wreaked havoc on oil demand and prices, Reliance also sharpened its focus on renewable energy by committing US$10.1 billion over 3 years to become a net carbon zero company by 2035.

Analysts at Jefferies said the deal cancellation may not hurt the conglomerate's balance sheet, but is disappointing as it loses a chance to set a benchmark of US$75 billion valuation for the oil business.

"The market is reacting as it expected the deal to help reduce exposure to hydrocarbons business, but this has gotten delayed," said Sumit Pokharna, VP Research at Kotak Securities.

"However, Reliance has factors working in its favour, including a sharp recovery in refining margins, a possible hike in telecom prices and Jio subscriber additions and a strong retail business."

Despite the change in strategy, Reliance said on Monday Aramco would continue to be its preferred partner for investments in the private sector in India.

The company recently inducted Aramco chairman Yasir Al-Rumayyan to its board amid opposition by investor California State Teachers' Retirement Fund.

Al-Rumayyan's appointment, initially seen as part of a process to formalise the stake sale, was later said to have no connection to the deal.

Reliance shares, which are set for their worst day in about 10 months, dragged the blue-chip Nifty 50 index down more than 1 per cent.

REUTERS