Saudi Aramco remains in talks with Reliance
SAUDI ARAMCO remains in discussion with Reliance Industries Ltd for a potential deal to buy a 20 percent stake in its oil-to-chemical (O2C) unit, Morgan Stanley said on Monday citing the Saudi firm's analyst call post announcing 2020 earnings.
Richest Indian Mukesh Ambani had in August 2019 announced talks for the sale of 20 percent stake in the O2C business, which comprises its twin oil refineries at Jamnagar in Gujarat and petrochemical assets, to the world's largest oil exporter.
The deal was to conclude by March 2020 but has been delayed. ‘Saudi Aramco's CY20 conference call indicated that it is still in discussion with Reliance to evaluate existing opportunities as potential partners, regarding the non-binding MoU signed with Reliance for its O2C business,' Morgan Stanley said in a note.
‘Saudi Aramco remains in discussion with Reliance for potential partnership,' Morgan Stanley said. With asset prices, industry outlook, and margins back to August 2019 levels, it saw a revival of the earnings upgrade cycle, led by energy. Multiples should surprise positively too as clarity on new energy investments rises.
‘Reliance had recently announced carving out the O2C business as a separate subsidiary to support strategic partnerships and new investors in order to accelerating its new energy and material plans,' it said.
‘We expect the stake sale discussions to pick up pace – we see valuations and asset prices rebounding to levels seen in August 2019 with a much-improved industry outlook.'