Would There Be Saudi Aramco Man On RIL Board?

Saudi Aramco chairman and Governor of the Kingdom's wealth fund Public Investment Fund, Yasir Al-Rumayyan, may be inducted on the board of Reliance Industries Ltd, a precursor to a USD 15 billion deal, reports said.

An announcement of Al-Rumayyan's induction on the RIL board or the board of the newly carved oil-to-chemical (O2C) unit may come as early as at the company's annual shareholder meeting on June 24.

"RIL's Annual General Meeting (AGM) has historically been a keenly watched event (previously attended by 3,000 shareholders when held in physical format and last year saw 300,000 concurrent viewers of the virtual AGM across 42 countries and 468 cities) given that it has been one of the top 3 companies by market capitalisation in India, has a large free float and a large public shareholding (more than 3 million non institutional shareholders)," brokerage HSBC Global Research said in a report. And expectations are already built up for the AGM.

"Over the last year, new investors have joined RIL's digital and retail business at subsidiary level and RIL has formed new partnerships with global players like Google, Facebook, Microsoft, Qualcomm etc. Investors now expect RIL to give direction to these businesses and announce groundbreaking products," it said, adding reports suggest that it will likely announce a new smartphone partnered with Google and its pricing.

"There is also expectation of some update on Saudi Aramco deal and speculation that the Chairman of Saudi Aramco may join RIL's board," it said. Both RIL and Saudi Aramco did not reply to emails sent for comments.

An email sent to PIF too remained unanswered. PIF has already picked up a minority stake in Reliance Retail and Jio. Billionaire Mukesh Ambani had in August 2019 announced talks for the sale of a 20 per cent stake in the oil-to-chemicals (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 for reasons not disclosed by either company. Talks have revived this year and the two are reportedly discussing a cash and share deal - Aramco paying for the stake with its shares initially and then staggered cash payments over several years. In a separate report, BofA Securities said RIL's AGM each year has turned into a key event where chairman Mukesh Ambani provides more information on the outlook of key business divisions.

"Historically we have seen major announcements on phones, tariffs, stake-sales etc," it said. The deal to sell stake in O2C business to Aramco too was announced at RIL AGM in 2019. "We expect an update on Jio-Google phone features (like 5G), potentially pricing and timeline," it said. "Clarity on JioMart/other online commerce businesses along with the JioMart-WhatsApp integration" is also expected. Reports suggest "RIL may announce the appointment of Mr. Yasir Al-Rumayyan, chairman of Saudi Aramco and governor of the kingdom's wealth fund Public Investment Fund, on its board during AGM," it said.

"RIL may introduce a new affordable laptop to tap into the massive demand for work from home machines." Besides refineries and petrochemical plants, the O2C business also comprises a 51 per cent stake in the fuel retailing business. It, however, does not include the upstream oil and gas producing assets such as the flagging KG-D6 block in the Bay of Bengal.

RIL had in 2019 put USD 75 billion as the value of O2C business after signing a non-binding letter of intent with Saudi Aramco. The firm had recently announced carving out the O2C business as a separate subsidiary to support strategic partnerships and new investors in order to accelerate its new energy and material plans. Digital business is already held by a subsidiary Jio Platforms and Reliance Retail holds the offline and online retail business. Aramco buying 20 per cent in O2C business would allow Reliance to build financial muscle as it carves out space for itself in highly competitive omnichannel retail.

With a stake, Aramco would not only have a stake in one of the world's best refineries and largest integrated petrochemical complex. It has access to one of the fastest-growing markets, a ready-made market for 5 lakh barrels per day of its Arabian crude and offering a potentially bigger downstream role in future.

RIL refineries are one of the most complex in the world, allowing it to earn a significant premium to the benchmark Singapore gross refining margin. Its petrochemical complexes rank among the biggest in the world, whose dependency on outside raw materials is minimal. It has leadership positions both in the domestic polymer and polyester markets.

PTI