Reliance Industries shares surged 12 per cent on Tuesday - which is believed to be its biggest one-day gain in over a decade - adding over Rs 80,000 crore to its market cap. This comes a day after Reliance Industries chairman Mukesh Ambani announced the Aramco deal at the company's shareholder meeting.
On Monday, billionaire Mukesh Ambani announced plans to sell stakes in the firm's oil and chemicals business to Saudi oil giant Aramco and in fuel retail network to BP plc for Rs 1.15 lakh crore. Saudi Aramco will buy a 20 per cent stake in the oil and chemicals business of Reliance, including the 1.36 million barrels a day Jamnagar refining complex in Gujarat, for an enterprise value of USD 75 billion. BP will buy 49 per cent stake in the firm's 1400 petrol pumps and aviation fuel selling facilities at 31 airports for another Rs 7,000 crore. The twin deals along with deleveraging of telecom arm Jio's infrastructure assets will help Reliance become a zero-net debt company by March 31, 2021.
On Tuesday, Reliance Industries shares rose 12.09 per cent to Rs 1302.50 on the Bombay Stock Exchange. Among all the 30 companies in the index, RIL had the maximum gain. In National Stock Exchange too, RIL shares surged 12.10 per cent to Rs 1302.80.
The company, which had a net debt of Rs 1,54,478 crore as on March 31, 2019, also intends to list its retail and telecommunication units within five years. A zero-net debt company would mean that borrowings fall below cash reserves with the firm, a level Reliance hasn't seen since 2013. It had an outstanding debt of Rs 2,88,243 crore as on June 30, 2019, and a cash balance of Rs 1,31,710 crore as on June 30.
Reliance has invested Rs 5.4 lakh crore, mostly in debt, in the last five years in the expansion of its oil to chemicals business, creating 4G wireless telecom network that offers high-speed internet and in setting up India's largest retail chain. The debt levels had raised concerns among analysts including at Credit Suisse Group AG which felt the ballooning borrowings would weigh on growth. Ambani sought to allay those fears.
The deal with Aramco covers all of Reliance's refining and petrochemicals assets as well as the remainder of stake the firm has in fuel retailing business after selling 49 per cent to BP.
The world's biggest crude producer, Aramco will also supply 5,00,000 barrels of crude oil to Jamnagar refineries, roughly double of the amount Reliance buys from Saudi Arabia currently.
Stake in Reliance business is apart from 50 per cent interest Aramco along with UAE's ADNOC is picking up in a planned USD 60 billion refinery on the west coast of India. These investments are part of Aramco's plan to double oil processing capability under its belt to 10 million barrels a day by 2030, locking in friendly buyers for the Kingdom's crude.
The deal is subject to due diligence, definitive agreements, and regulatory and other approvals, Ambani said.