Saudi Aramco, BP Deal To Help RIL Become Debt-Free By March 2021

Assuaging investor worries, RIL CMD Mukesh Ambani before concluding the speech at 42nd AGM meet, said that "We have a very clear roadmap to becoming a zero net-debt company within the next 18 months that is by 31st March 2021".

Earlier in the month, RIL's stock was downgraded by Credit Suisse to 'underperform' from 'neutral' rating and also reduced its target price. Global brokerage said that the oil to telecom conglomerate in its refining and petrochemicals business segment is confronting margin pressure and has been free cash flow negative for 6 years now. And the FCF negative status shall continue to remain for FY20.

RIL in its largest ever FDI deal in the country will offload 20% stake in its oil to chemicals business to Saudi Aramco. The deal subject to regulatory approvals will be valued at $75 billion.

Also, in another deal announced last week, the US-based company BP will buy 49% stake in retail distribution business of RIL.

"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.

"This programme to aggressively pursue deleveraging in businesses such as OTC, fiber 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 USD 10 trillion by 2030", said Ajay Bodke, CEO, PMS Prabhudas Lilladher.

Also, the company has plans to separately list its 2 major consumer focussed businesses, Reliance Jio and Reliance within the next five years," Ambani said.

Further, Ambani speaks of unleashing its capabilities to meet the opportunity in the unorganized retail segment worth $700 billion, which the company coins as 'new commerce'. Also, globally the company's retail business Reliance Retail now commands a position among top 100 retail companies.

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

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