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Moody's says Reliance stake sale to Aramco credit positive

PTI | New Delhi | Updated: 14-08-2019 10:23 IST | Created: 14-08-2019 10:19 IST
Moody's says Reliance stake sale to Aramco credit positive
Image Credit: Wikipedia

Moody's Investors Service on Wednesday said Reliance Industries' announcement of the sale of a 20 percent stake in its oil to chemicals (O2C) business to Saudi Arabian Oil Company (Aramco) will reduce the company's net leverage and is credit positive. "The O2C business, which has an enterprise valuation of USD 75 billion, includes RIL's refining and petrochemical divisions, and RIL's 51 percent stake in its fuel marketing business," Moody's said in a report.

The company also announced that it has entered into a deal with BP to sell 49 percent stake in its fuel marketing business in India for USD 1 billion. "Together, proceeds from these transactions will result in a USD 16 billion reduction in RIL's net debt, which will reduce RIL's adjusted net debt/EBITDA by 1.2x from 3.2x for the fiscal year 2019, which ended in March 2019, a credit positive," it said.

The Aramco transaction structure is yet to be finalized and also remains subject to regulatory and other approvals. RIL expects that the transaction will close before March 2020.

It will receive the proceeds in three stages - 50 percent on closing, another 25 percent after one year of closing and the balance 25 percent in the following year. The O2C business will be carved out into a division where Aramco will have an economic interest. It will have its own management and accounts.

"However, currently there are no firm plans to create a separate legal entity for this division (except for the fuel marketing business, which will be in a separate entity)," it said. "The stake sales are in line with the company's target to reduce its net debt to zero by March 2021 and reflect the company's commitment to maintaining a strong financial profile despite significant capital spending over the last five years," it added.


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