The Strategist

Saudi Aramco to take part in Indian Reliance Industries

08/17/2021 - 10:52

The largest oil producer Saudi Aramco plans to buy shares of Reliance Industries holding owned by India's richest man Mukesh Ambani, Bloomberg reports referring to its sources. Reliance is also engaged in oil and gas production and refining.
Saudi Aramco intends to enter Reliance through a $20 billion to $25 billion acquisition of a 20 percent stake. The deal will close in the coming weeks, although negotiations have been ongoing for more than two years - the delay has been affected by the pandemic and the drop in oil prices. Sources said the details of the agreement are still under negotiation and so the conclusion could be delayed. If successful, the Saudi oil producer will make its first stock purchase since its IPO in December 2019. Reliance shares rose 2.6 percent on the news, but then fell slightly and were trading at 2,173 Indian rupees ($29.3) apiece (plus 1.3 percent) at the time of writing.

The agreement will further strengthen the bond between Saudi Arabia and India. In 2019, the countries established a Strategic Partnership Council to enhance cooperation. In August 2020, Riyadh stopped the loan to Pakistan, thereby supporting India in the territorial dispute over Kashmir.

Financially, the deal benefits both sides. For Saudi Aramco, it means more oil exports to India and the prospect of reaching its daily refining target of 3.6 million barrels to 10 million. In July, Saudi Arabia supplied 613,000 barrels of oil per day to India, which is 10 percent of all exports.

In the second quarter of 2021, Saudi Aramco's profits rose nearly 300 percent - four times as much as a year ago - to $25.5 billion. The surge was due to higher oil prices, the easing of coronavirus restrictions, vaccinations and a return to economic activity.


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