BP, Aramco deal to help Reliance Industries become debt-free by March 2021

Mukesh Ambani, Chairman of Reliance Industries Ltd (RIL), on Monday said that the company could become debt-free over the next 18 months.

“We have a very clear roadmap to becoming a zero net-debt company within the next 18 months, that is by March 31, 2021,” Ambani said.

Reliance Industries Ltd (RIL) will sell a 20 per cent stake in its oil-to-chemicals business to Saudi Aramco at an enterprise value of $75 billion, making it one of the biggest foreign direct investment (FDI) deals in the country.

Last week, RIL had announced a deal with BP wherein the UK-based company will acquire 49 per cent stake in RIL’s retail distribution business.

‘Win-win’ relationships

“Our transactions with Saudi Aramco and BP will create ‘win-win’ relationships, generating significant strategic value for our partners. We expect to complete these transactions within this financial year, subject to definitive agreements, due diligence, regulatory and other customary approvals. The commitments from these two transactions are about ₹1.1 lakh crore,” Ambani said. RIL had ended last year with net debt of ₹1,54,478 crore.

Commenting on the development, Ajay Bodke, CEO, PMS Prabhudas Lilladher, said, “This programme to aggressively pursue deleveraging in businesses such as OTC, fibre and tower, and emerge as a zero net-debt company in the next 18 months, will strengthen the consolidated balance sheet, leading to strong valuation re-rating of the stock. RIL continues to remain as the pre-eminent play on the Indian economic juggernaut, that is likely to touch $10 trillion by 2030.”

RIL is also looking to unlock value in other businesses. “We have received strong interest from strategic and financial investors in our consumer businesses — Jio and Reliance Retail. We will induct leading global partners in these businesses in the next few quarters, and move towards listing of both these companies within the next five years,” Ambani said.

Bets on ‘new commerce’

Stating that Reliance Retail has created a pole position in the $80-billion organised retail market in the country, Ambani said the company has built capabilities to address the $700-billion unorganised retail opportunity, which RIL terms as “new commerce”.

“We will also evaluate value unlocking options for our real estate and financial investments,” he added.

“With these initiatives, I have no doubt that your company will have one of the strongest balance sheets in the world. As we achieve our zero net-debt target, I assure you, my dear shareholders, that we will reward you abundantly through higher dividends, periodic bonus issues and other means, and at a more accelerated pace than any time in our history,”Ambani said.

Ambani also said that RIL has received Letter of Intent from the government to set up Jio Institute under the Institute of Eminence framework. This will be the country’s largest research university, he added.