Stocks

Are Mukesh Ambani, India’s wealth fund NIIF looking to buy into Aramco IPO?

P Manoj Mumbai | Updated on November 18, 2019 Published on November 18, 2019

Asia’s richest person Mukesh Ambani and India’s sovereign wealth fund, National Investment and Infrastructure Fund (NIIF), may buy into the IPO of Saudi Aramco, the world’s most profitable company, as the initial public offering opens for subscription this week.

Billed the world’s biggest IPO yet, both Ambani, the largest shareholder of the oil-to-telecom conglomerate Reliance Industries Ltd (RIL), and NIIF could use the share purchase as a show of faith in Aramco, India’s second biggest oil supplier, say sources.

Reliance did not respond to an e-mail sent on November 14 seeking comment, while NIIF could not be reached immediately for a reaction.

Read also: Aramco declares $1.71 trillion valuation in blockbuster IPO

 

Aramco is seeking to raise $25.6 billion by selling a 1.5 per cent stake at an indicative price of 30-32 Saudi Riyals ($8).

Trusted supplier

Prime Minister Narendra Modi has left no stone unturned to strengthen the relationship with the Saudi royals through official visits and diplomatic exercises to ensure uninterrupted oil supply from the world’s biggest producer.

India imports 83 per cent of its oil needs, with Saudi Arabia supplying a fifth of these. Saudi Arabia is India’s second-biggest supplier after Iraq, selling 40.33 million tonne (mt) of crude to India in FY19 out of the 207.3 mt it imported.

Aramco, along with Abu Dhabi National Oil Company (ADNOC), has agreed to hold half the equity in a planned ₹3-lakh crore, 60 million tonne (mt) integrated oil refinery and petrochemicals complex in Maharashtra being helmed by India’s state-run oil refiners. In October, the Indian Strategic Petroleum Reserves Ltd, a government company tasked with building oil storage, signed an MoU with Aramco to participate in the 2.5-million-tonne underground storage facility in Karnataka.

These developments indicate Aramco’s strategy to invest in overseas refining ventures to guarantee new outlets for its crude oil.

Ambani, on the other hand, took his two-decade-long bond with Aramco a step further by signing a non-binding letter of intent with the Saudi giant in August to sell a 20 per cent per cent stake in Reliance Industries for ₹1.03 lakh crore or roughly $15 billion.

Ties with Aramco

Ambani alluded to his relationship with Aramco while announcing the deal at his company’s annual general meeting in Mumbai on August 12, saying that Aramco has been supplying oil to its Jamnagar refinery “since its inception every single day for 20 years”.

The RIL-Aramco deal will be the biggest foreign investment in “the history of Reliance” and among the largest foreign investments into India, Ambani said on August 12, adding that “the coming year will mark the beginning of the most ambitious value creation strategy in the history of Reliance” at the heart of which is the “innovative philosophy of transforming relationships into partnerships” with “leading global and Indian companies”.

As part of the deal with RIL, Aramco will supply up to 700 (KBPD) or 500,000 barrels per day of crude oil on a long-term basis to the Jamnagar refinery.

Published on November 18, 2019
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