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April 21, 2019

Possible Aramco-Reliance Industries deal

National

April 21, 2019

LAHORE: The Dahrain-based Messrs Saudi Aramco, officially the Saudi Arabian Oil Company, (formerly Arabian-American Oil Company), is currently holding meaningful parleys with India's largest business house - the Reliance Industries - for acquiring 25 per cent of this formidable Mumbai-based conglomerate’s refining and petrochemical units for at least $10 billion.

This development has been reported exrtensively by numerous neighbouring media houses like the “Economic Times” and the “BloombergQuint”, which is an Indian business and financial news organization, a joint venture of Bloomberg News and Quintillion Media.

The “Economic Times”, world’s second-most widely read English-language business newspaper, after the Wall Street Journal, has stated: “Saudi Aramco, which is also the world's largest oil exporter, is known to have first shown interest in Reliance about four months ago, talks gathered momentum following the visit of Saudi crown prince Mohammed bin Salman to India in February, during which he met Reliance Industries chairman and India's richest man, Mukesh Ambani.”

This leading Mumbai-based Indian newspaper, having a daily circulation of 377,789 copies, has added: “There might be an agreement on valuation around June this year, people with knowledge of the development said. A minority stake sale could fetch around $10-15 billion, valuing RIL’s refining and petrochemicals businesses at around $55-60 billion. At Tuesday's share price, RIL has a market capitalization topping $122 billion (or Rs 8.5 lakh crore).”

Having revenues in excess of US $60 billion, an operating income of around $10 billion, a net income of $5 billion, assets worth $110 billion, around 44.7 per cent stakes in Reliance Industries are held by the renowned Yemen-born Indian tycoon, Mukesh Ambani, who will incidentally turn 62 Friday (today) and is worth US $54.2 billion and thus ranked by “Forbes” magazine as the 18th-wealthiest person in the world in January 2018.

Reliance, as stated above, is the largest Indian company, served by 187,729 employees, of which 29, 533 are permanent staffers.

This business house continues to be India’s largest exporter, accounting for 8 per cent of country’s total merchandise exports with a value of Indian Rs 147,755 crore and access to markets in 108 countries.

On the other hand, Saudi Aramco, rated as the most profitable company in the world by “Bloomberg”, is one of the largest business enterprises on the planet with second-largest proven crude oil reserves in the world at more than 270 million barrels and second-largest daily oil production.

Saudi officials and “Bloomberg” have both backed an official figure of $2 trillion for Saudi Aramco’s value.

This firm, having recently raised $12 billion through bonds, manages over one hundred oil and gas fields in Saudi Arabia, including 288.4 trillion natural gas reserves. Its revenues stand at US $355.9 billion; it has a net income of US $111.1 billion and is served by at least 65,266 staffers.

The “Economic Times” goes on to write: "Goldman Sachs, the storied investment banker, is said to have been mandated to advise on the proposed deal. “RIL has grown too big - from energy to retail to telecom. It needs to compartmentalize. It makes sense to spin off some of its verticals. It'll help raise funds and unlock shareholder value,” said a highly placed person in the financial sector who didn't wish to be quoted since he didn’t have direct knowledge of the matter.”

It adds: “Saudi Arabian Oil Co. is doing its best to make nice with one of its biggest customers. With the ink barely dry on the takeover of 70 per cent of the country’s chemical giant Saudi Basic Industries Corp. and the issuance of its first-ever corporate bond; Aramco is looking to buy a stake in the world’s biggest oil refinery.”

The “Economic Times” has further maintained: "Indian billionaire Mukesh Ambani’s Reliance Industries Ltd. is seeking to sell much as a quarter of its refining business for at least $10 billion and is entertaining offers from Aramco and Abu Dhabi National Oil Co., people with knowledge of the matter told Bloomberg News this week. That represents quite a prize. Reliance’s Jamnagar refinery is about twice the size of the biggest US plant, Aramco-owned Port Arthur, and is so massive that maintenance work occasionally skews India’s entire trade balance.”

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