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Saudi Plan To Get Stake In India’s Largest Company Hits A Snag

Discussions between India’s largest company, Reliance Industries, and Aramco, the world’s single biggest oil producing firm, have hit a stumbling block as the Indians want higher valuation than the Saudis are willing to pay for a stake in Reliance’s downstream business, Reuters reported on Tuesday, quoting two people with knowledge of the issue.

In April this year, reports emerged that Saudi Arabia’s oil giant Aramco was in “serious discussions” to buy up to 25 percent of the refining and petrochemicals businesses of India’s largest company, Reliance Industries.

Aramco first showed interest in Reliance’s downstream business months ago, but discussions sped up after Saudi Crown Prince Mohammed bin Salman visited India in February, according to The Times of India

The two sides could reach an agreement on the value of a possible deal around June, the Indian outlet’s sources said. A stake of 25 percent could fetch around US$10 billion-US$15 billion for Reliance, which would value the Indian company’s total refining and petrochemicals business at some US$55 billion-US$60 billion.

According to Reuters’ sources, however, Reliance is asking for a higher price and it also wants to transfer debt of the holding group to the new special purpose vehicle (SPV) of refining, chemicals, and marketing, in which Reliance is reportedly offering Aramco at least a 20-percent stake.

Related: Morgan Stanley: Why Tanker Wars Aren’t Causing An Oil Price Spike

In recent years, Saudi Arabia has been pursuing downstream deals in Asia—the most prized market for oil exporting nations, aiming to lock in future demand for Saudi crude oil. India, for its part, is a fast-growing demand center and the world’s third-largest oil consumer after the U.S. and China.

Aramco, together with the Abu Dhabi National Oil Company (ADNOC), is also partnering with Indian state oil firms to build a giant US$44-billion refinery in India, which has faced roadblocks and delays. Construction on the giant refinery has not started yet.

Last month, the Indian state of Maharashtra identified a new location for the refinery after the process of land acquisition at the previous site was put on hold late last year due to strong opposition from local farmers. Farmers had opposed the choice of site for the giant refinery because many of them depend on their land for their income and livelihoods.

By Tsvetana Paraskova for Oilprice.com

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