Tag: Saudi Aramco

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Reliance, Aramco to Re-Evaluate Investment Proposal – Top Indian Market News

Reliance, Aramco to re-evaluate investment proposal

Reliance Industries Ltd (RIL) and Saudi Aramco have mutually decided to re-evaluate a major investment proposal concerning the Oil to Chemicals (O2C) business of RIL. The deal was estimated to be about $15 billion. The current application with the National Company Law Tribunal (NCLT) for segregating the O2C business from RIL is being withdrawn.

Both companies had signed a non-binding Letter of Intent (LoI) in August 2019 for a potential 20% stake acquisition by Saudi Aramco in the O2C business of RIL.

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Govt puts MTNL, BSNL assets worth about Rs 1,100 crore on sale

The government has listed real estate assets of state-run telecom firms MTNL and BSNL for sale at a reserve price of around Rs 1,100 crore. BSNL properties located in Hyderabad, Chandigarh, Bhavnagar, and Kolkata have been posted for sale at a reserve price of ~Rs 800 crore. The Department of Investment and Public Asset Management (DIPAM) website has listed MTNL assets located in Vasari Hill, Goregaon in Mumbai for sale at a reserve price of Rs 270 crore.

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IRB Infra shareholders pass resolution for Rs 5,347 crore capital inflow

IRB Infrastructure Developers Ltd’s shareholders have passed a resolution that will enable a capital inflow of Rs 5,347 crore into the company. This move will allow IRB Infra to issue shares worth up to Rs 5,347 crore to Cintra Global S.E. (a wholly-owned subsidiary of Spain-based Ferrovial S.A) and Bricklayers Investments (an affiliate of GIC, Singapore Sovereign wealth fund).

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Sundaram AMC gets SEBI approval for its acquisition of Principal AMC in India

Sundaram Asset Management Company (AMC) has received approval from market regulator SEBI to acquire Principal Asset Management Company in India. The company will acquire the schemes managed by Principal India and 100% of the share capital of its subsidiaries. As per regulatory requirements, there will be an ‘exit load free window’ for investors to redeem their investments. Sundaram AMC is a wholly-owned subsidiary of Sundaram Finance Ltd. 

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Prices of apparel, textiles to increase from Jan 1 as Govt raises GST from 5% to 12%

The prices of apparel, textiles, and footwear are set to increase from next year as the Central Board of Indirect Taxes (CBDT) notified an increase in the Goods & Services Tax (GST) rate from 5% to 12%. The increased GST rate on the categories will be applicable from January 1, 2022. However, GST rates on or certain synthetic fibres and yarn have been lowered from 18% to 12%, making rates uniform across the entire textile sector. 

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EPFO plans to invest 5% of annual deposits on InvITs, alternative funds

Employees’ Provident Fund Organisation (EPFO) has approved measures to invest up to 5% of its annual deposits in infrastructure investment trusts (InvITs) and other alternative funds. Under its current investment pattern, EPFO invests around 45-50% of its incremental deposits in government securities, 35-45% in debt instruments, around 5-15% in the equity market, up to 5% in short-term debt instruments, and another 5 % in short-term debt instruments. You can learn more about the operations of EPFO here.

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Market News Top 10 News

Aramco, RIL in Advanced Talks for $25 billion Deal – Top Indian Market News

Saudi Aramco in advanced talks with Reliance for $25 billion deal: Report

According to a report from Bloomberg, Saudi Aramco is in advanced talks for an all-stock deal to acquire a stake in Reliance Industries Ltd’s (RIL) oil refining and chemical business. Aramco is discussing the purchase of a nearly 20% stake in the Reliance unit for about $20-25 billion (Rs 1.48 – 1.85 lakh crore) worth of Aramco shares. The report further states that RIL could reach an agreement with Suadi Aramco as soon as the coming weeks.

RIL had announced the sale of a 20% stake in its oil-to-chemicals (O2C) business to Aramco for $15 billion in 2019. However, the deal stalled after oil prices and demand crashed last year due to the Covid-19 pandemic.

Read more here. 

India’s WPI inflation eases to 11.16% in July

The inflation based on the Wholesale Price Index (WPI) eased to 11.6% in July 2021, compared to 12.07% in June. Inflation in manufactured products stood at 11.2% in July, compared with 10.88% in June. The inflation in food articles remained flat against a 3.09% annual rise in June. The fuel and power index rose 26.02% annually in July, compared to an increase of 32.83% in June. The data was released by the Ministry of Commerce and Industry.

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Tata Motors partners with Bank of Maharashtra for car loan scheme

Tata Motors has partnered with the Bank of Maharashtra to offer car loan facilities for its ‘New Forever’ range of passenger vehicles. Under the partnership, the bank will provide loans to Tata Motors’ customers at an interest rate starting from as low as 7.15% linked with Repo Linked Lending Rate (RLLR). The ‘Maha Super Car Loan scheme’ will offer a maximum of 90% financing on the total cost of the vehicle (on-road pricing) for salaried employees, self-employed people, and businessmen.

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HDFC Bank to raise funds by issuing AT-1 bonds in overseas market

HDFC Bank has announced plans to raise capital by Additional Tier-I (AT1) bonds in the overseas market to fund its business growth. The bank is expected to raise up to $1 billion (~Rs 7,420 crore) from the dollar-denominated bonds. An offering memorandum (OM) has been prepared and will be available to prospective investors in relation to the contemplated issue of debt instruments.

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Tyre industry body ATMA urges government to allow duty-free import of natural rubber

The Automotive Tyre Manufacturers Association (ATMA) has asked the government to allow the duty-free import of natural rubber. The shortage of the commodity in India has become a major obstacle for the tyre industry to support domestic manufacturing. According to ATMA, natural rubber consumption is likely to increase further, and the annual demand is expected to cross 13 lakh tonnes in FY22. The tyre industry accounts for over 70% of natural rubber consumed in India.

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Tata Steel lays out capital expenditure of Rs 3,000 crore for European operations

“Tata Steel has laid out a capital expenditure of Rs 3,000 crore for its European operations as its focus is to make the business stronger”, said CEO and Managing Director T.V. Narendran. The company’s operations in Europe are being separated into Tata Steel Netherlands and Tata Steel UK, which would help in cost efficiencies and management focus. Tata Steel’s CEO further stated that the European business will be cash positive in terms of EBITDA and Profit After Tax (PAT) in the current financial year (FY22). 

Ruchi Soya gets SEBI approval to launch Rs 4,300 crore FPO

Ruchi Soya Industries Ltd has received approval from market regulator SEBI to sell fresh shares worth up to Rs 4,300 crore through a follow-on public offer (FPO). The FPO is being launched to meet SEBI’s minimum public shareholding norm of 25% in a listed entity. Ruchi Soya’s promoters will dilute a 9% stake in the company through the FPO. According to reports, the proceeds from the FPO will be used for reducing the company’s debt and meet working capital requirements. Ruchi Soya is owned by Baba Ramdev’s Patanjali Ayurveda.

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Rules on retro tax to be framed soon: Nirmala Sitharaman

Finance Minister Nirmala Sitharaman has stated that the rules that will lead to the scrapping of the retrospective tax demands made on companies such as Cairn Energy plc and Vodafone plc will be framed soon. Earlier this month, the Parliament had passed a bill to scrap all tax demands made using the 2012 retrospective tax legislations. The Finance Ministry officials are conducting discussions with Cairn and Vodafone on the closure of retro tax cases, refund, and settlement. You can learn more about retrospective taxation here.

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Olectra Greentech secures order worth Rs 70 crore for 50 e-buses

Olectra Greentech Ltd has received a Letter of Award (LoA) from Gujarat State Road Transport Corporation (GSRTC) for the supply of 50 nine-meter electric buses. The supply will be on a Gross Cost Contract (GCC) basis for a period of ten years. The order is valued at Rs 70 crore. The buses will be delivered over a period of 12 months. Hyderabad-based Olectra Greentech is a leading manufacturer of e-buses and insulators in India.

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Ramkrishna Forgings wins order worth €20 million

Ramkrishna Forgings Ltd has secured a multi-year order from a European Tier-1 customer in the auto segment worth €20 million (~Rs 174 crore). The order is to be implemented over a period of four years. Ramkrishna Forgings is a leading manufacturer and supplier of open and closed die forgings of carbon and alloy steel, micro-alloy steel, and stainless steel.

Read more here. 

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Editorial

BPCL and its Privatization News. What to Expect?

Bharat Petroleum Corporation Limited (BPCL) has been a hot company to keep an eye on since the Indian government had intended to sell its stake in the company. Why is all the fuss about BPCL? What are the developments in its privatization? Let’s check it out here.

All on the Privatization front

The government plans to sell its 52.98% stake in BPCL as part of its ambitious divestment process. As expected, the company received multiple expressions of interest (EOI) from different entities who were willing to purchase the government’s stake.

To everyone’s surprise Reliance, Saudi Aramco, United Kingdom’s BP or France’s Total didn’t express their interest in buying BPCL. These companies along with Russia’s Rosneft-led Nayara Energy were considered to be the most eager parties but none of them came forward to participate in the bid. Vedanta Group is one of the three entities to submit an EOI for BPCL’s acquisition. 

The other two are private equity firms Apollo Global and I Squared Capital’s arm Think Gas. Currently, BPCL owns 22.5% of Indraprastha Gas Ltd (IGL) and 12.5% of Petronet LNG Ltd and acts as a co-promoter. The rumours were high that BPCL will be selling its stake in IGL and Petronet which could prove to be very destructive for the company.

But the management of the energy company came ahead and squashed all these stories. As a part of their divestment strategy, BPCL sold its entire 61.5% stake in Numaligarh Refinery in Assam to a consortium of Oil India, Engineers India and Government of Assam for Rs 9,876 crore. The majority of the chunk went to Oil India who bought a 54.16% stake. This helped them to increase their refinery shareholding to 80.16%. 

This was done to stay aligned with the Assam Peace Accord which asks the government to keep Numaligarh Refinery in the public sector. The privatization-bound company also bought Oman Oil company’s remaining shares in the Bina refinery project for about Rs 2,400 crore. It already had a 63.68% stake in Bharat Oman Refineries which will get increased to 100% after this purchase.

The most recent update came that the government might tweak FDI policy to allow 100% Foreign Direct Investment (FDI) in BPCL. However, that seems to be confusing because according to the current FDI policy, FDI is restricted to 49% under the automatic route in petroleum refining by PSU. 

Now it has been told that the ministry of commerce and industry will elaborate on this tweak in the coming days. It is definitely something we have to keep a watch on! Can you imagine one of the biggest Indian oil companies run by a foreign entity completely?!

A look at their Q4 performance

BPCL announced a net profit of Rs 11,940 crore for the quarter ended March as against a net loss of Rs 1,361 crore which was reported in the same quarter in the previous year. One of the key things to look at is how much of this came from their operating business. Remarkably, the total revenue from operations increased by 21.5% to Rs 98,755.6 crore for the quarter. 

There was a one-time exceptional gain of Rs 6,992.95 crore in the financial books. The company sold its Numaligarh Refinery (covered in the above section) through which it gained Rs 9,422 crore. After taking an impairment of assets worth Rs 2,032.8 crore and expenses related to employee shares, their total gain reached Rs 6,992.95 crore. Their Gross refining margin (GRM) surged to $4.06 per barrel in FY21 as compared to $2.5 per barrel in FY20. The GRM refers to the earnings by converting one barrel of crude into fuel.

Not only this, BPCL made its investors feel ecstatic by offering a final dividend of Rs 58 per share. This had a one-time special dividend of Rs 35 per equity share which was offered due to the sale of the Numaligarh Refinery. Not to mention, they have already announced an interim dividend of Rs 21 per share. Thus, a total dividend of Rs 79 per share for a stock trading in the range of Rs 400. That is amazing!

Still, a long way to go?

Despite challenges put forward by this pandemic, BPCL has made huge steps towards its privatization. BPCL’s sale will help the Indian government to reach the Rs 1.75 lakh crore disinvestment target set for 2021-22. This disinvestment has become more important in these tough Covid-19 times when the government has to spend a lot from their pockets. 

The revenues of the government are hit due to this pandemic, and on the other side, their expenditure has increased massively. Another roadblock is that the bidder who purchases the government’s stake might have to make an open offer to other shareholders for acquiring another 26% at the same price. 

Also, the final bidders will wish to visit the refineries and sites personally which cannot be allowed completely due to restrictions on international travel. Thus, one can expect another six months to complete this deal. 

Currently, BPCL holds 15.33% of India’s oil refining capacity and 22% of the total fuel marketing share. This means whichever company acquires it, will gain a good hold of energy refinery and distribution in India. Thus, it becomes even more interesting to wait and see who takes control of it.

What are your opinions on BPCL and its privatization? Were you holding BPCL when they announced their special dividend? How happy were you? Let us know in the comments section of the marketfeed application!

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Editorial

Reliance set for another Bull Rally? Oil Business Split and Aramco Rumours

The biggest private company in India, Reliance, came out with a major update regarding its future. The Mukesh Ambani led organisation announced that it has begun the process to move its oil-to-chemicals (O2C) business into an independent subsidiary. Currently, we know Reliance as the telecom market leader with the aid of Jio. But, Reliance’s core business remains to be in the oil and refinery sector. 

With this announcement, the company will shift all of its refining, marketing and petrochemical assets to the O2C subsidiary. As of now, Reliance will retain 100% management control in this new subsidiary but we believe that soon this percentage will dropdown. Another big news from their house is that this new subsidiary will get a $25 billion loan from the parent company. This will be an interest-bearing loan that will be paid by the O2C subsidiary to the parent company. This is a normal practice in the world of finance and business. You can imagine it as something like getting a loan from your father with a promise to pay it back after a few years.

The importance of O2C business often undermined because of the rapid rise of Jio Platforms and Reliance Retail. But just for the perspective, 60% of Reliance’s revenue last fiscal year came from its O2C business. To understand more about how Reliance can generate its numbers, click here.

Imminent stake sale of O2C business

Last year, they amassed $27 billion from global investors like Google, Facebook and many others by selling stakes in their subsidiaries. Currently, Reliance holds an 85.1% stake in Reliance Retail and a 67.3% stake in Jio Platforms. With the advent of a new subsidiary, we can expect a possible stake sale in the new O2C subsidiary. The market believes that one of the most possible reason behind this hiving off is to attract investments from other companies. One such organisation which is reported to buy 20% stake in Reliance O2C business is Saudi Aramco. 

Saudi Aramco is a Saudi Arabian public petroleum and natural gas company. It is one of the biggest companies in the world and the biggest company in the oil business. If Reliance can bring Saudi Aramco to their table, it will be a huge boost for their O2C business operations.

Mergers & acquisitions, demergers, investments, etc are very complicated deals. Months of due diligence is required before the conclusion of any such deal. It was in 2019 when for the first time the market heard the rumours of Saudi Aramco investing in Reliance. But due to the Covid-19 pandemic last year, this deal stalled off and since the start of the year, we didn’t hear much about it. 

Now, with this mega move, we believe that a deal with Saudi Aramco might be wrapped soon. As said earlier, having a global player on your table will help you massively. Saudi Aramco, being the biggest company in this domain, will share their expertise and generate benefits from the second-highest populated country in the world.

The O2C business includes a 51:49 joint venture with British Petroleum (BP) in Reliance BP Mobility. Currently, Reliance holds around 1,400 outlets but plan it to expand to 5,500 retail outlets in the next five years.

A New Look for Reliance?

We have reported earlier as well that Mukesh Ambani wants his organisation to lead India’s fight to clean energy. In September 2020, he said, “We are working towards the transformation of energy. And we think again that the world is right and India is in the right mindset to completely, in the next few decades, move away from fossil fuels to completely renewable energy.”

By turning O2C into a separate subsidiary, Reliance will have more space to focus on green and clean energy. This hiving off will not dilute Reliance’s earnings or restrict their cash flows. In their presentation, the company also stated that it will accelerate hydrogen production and invest in carbon capture. Thus, aiming to convert carbon dioxide into products and chemicals which can be valuable for them and society.

Let’s see how this internal reorganisation will play for the company in the near future. But, as of now, we think that this might turn to be another positive decision from Mukesh Ambani & company.