Reliance and Aramco call off the proposed investment deal

Reliance and Saudi Armco have mutually decided to call off the proposed investment by the latter of $15 bn into Reliance’s Oil to Chemicals (O2C) business.

“Due to the evolving nature of Reliance’s business portfolio, Reliance and Saudi Aramco have mutually determined that it would be beneficial for both parties to re-evaluate the proposed investment in O2C business in light of the changed context,” RIL said in a late night statement on November 19.

Key points to note –

  • Both companies had signed a non-binding Letter of Intent in August 2019 for a potential 20% stake acquisition by Saudi Aramco in the O2C Business of RIL.
  • The words used are “re-evaluate”  and hence a deal is still possible.
  • Re-evaluation is due to the evolving nature of Reliance’s business portfolio especially it’s increasing focus on the renewables.
  • Accordingly, Reliance is also withdrawing the current application with NCLT for segregating the O2C business.

Personally, I believe that the deal is still possible albeit with different contours and also different timelines. Maybe the removal of this deal overhang will also allow Reliance to play more freely towards it’s ambitions in the renewal space.

I expect some quick announcements by Reliance to negate the impact of Aramco being put on hold.

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