Mumbai: On a mission to cut debt in Reliance Industries, billionaire Mukesh Ambani Monday 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, and said its telecom unit Jio will begin offering fibre-based broadband services from next month.
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 1,400 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 within the next 18 months, that is by March 31, 2021”, Ambani said at the company’s annual general meeting (AGM) here.
Reliance as a whole has an enterprise value of about USD 134 billion, including telecom and retail businesses. The company, which had a net debt of Rs 1,54,478 crore as March 31, 2019, also intends to list its retail and telecommunication units within five years, he said.
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 June 30, 2019, and a cash balance of Rs 1,31,710 crore as 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. The Ambani senior sought to allay those fears. “With these initiatives, I have no doubt that your company will have one of the strongest balance sheets in the world,” he said. “We will also evaluate value unlocking options for our real estate and financial investments.”
Ambani said the Saudi investment is “the biggest FDI in the history of Reliance” and “among the largest foreign investments in India.” BP had previously bought a 30 per cent stake in 21 oil and gas blocks of Reliance for USD 7.2 billion in 2011. 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, he said.