Reliance to sell stakes for Rs.1.15 lakh crore to become zero-debt firm

Mumbai: Richest Indian Mukesh Ambani on Monday announced plans to sell stakes in his flagship Reliance Industries' oil and chemical business to Saudi oil giant Aramco and in fuel retail network to BP plc of UK for a combined Rs 1.15 lakh crore as he looked to make his company a zero-net debt firm in 18 months.

Parallelly, the oil-to-telecom conglomerate will roll out fiber-based fixed-line broadband services from September 5, offering internet speed of at least 100 mbps, free voice calls for life, television and video streaming on HD sets given for free along with the connection that would come for as low as Rs 700 per month, he said at the company's 42th annual general meeting (AGM) here.

Ambani said Saudi Aramco will buy 20 per cent stake in Reliance's oil and chemicals business at an enterprise value of USD 75 billion while BP will pick up 49 per cent in the company's network of petrol pumps and aviation fuel facilities.

The Saudi investment is "the biggest foreign investment in the history of Reliance," he said. "It is also among the largest foreign investments in India." 

BP had previously bought a 30 per cent stake in 21 oil and gas blocks of Reliance for USD 7.2 billion in 2011.

The deal with Aramco covers all of Reliance's refining and petrochemicals assets as well as the remainder of stake the firm has in fuel retailing business after selling 49 per cent to BP, he said.

Aramco, the world's biggest crude exporter, will also supply Reliance's twin-refineries at Jamnagar in Gujarat with 5,00,000 barrels of oil a day on a long-term basis, Ambani said.

The deal is subject to due diligence, definitive agreements, and regulatory and other approvals, he said.

Ambani said BP will pay about Rs 7,000 crore for acquiring a 49 per cent stake in Reliance's fuel retailing network.

Last week, the two firms had announced a new joint venture to set up petrol pumps and retail aviation turbine fuel to airlines in India.

Reliance's existing 1,400-odd petrol pumps, as well as 31 aviation fuel stations, will be transferred to the new joint venture where BP will hold 49 per cent equity stake. Reliance will hold the balance 51 per cent in the entity, which aims to expand the retail network to 5,500 petrol pumps in the next five years, the two firms had said.

"In a significant new initiative, BP acquired a 49 per cent stake in our Petro-retail business. Reliance will get Rs 7,000 crore from BP for this transaction," Ambani said at the AGM.

The twin deals will help cut some of the Rs 2,88,243 crore group debt as on June 30, 2019. The debt, however, stood at Rs 1,54,478 crore after accounting for monetisation of telecom infrastructure such as



towers.

"We have a very clear roadmap to becoming a zero-net debt company within the next 18 months, that is by March 31, 2021," he said. "We expect to complete transactions with Saudi Aramco and BP within this financial year. These are expected to generate an inflow of Rs 1.15 lakh crore." 

Also, Reliance has received "strong interest" from strategic and financial investors for its consumer businesses -- telecom venture Jio and Reliance Retail, he said without giving details.

"We will induct leading global partners in these businesses in the next few quarters, and move towards the listing of both these companies within the next five years," he said. "We will also evaluate value unlocking options for our real estate and financial investments." 

With these initiatives, Reliance will have one of the strongest balance sheets in the world.

"As we achieve our zero-net debt target, I assure you, my dear shareholders, that we will reward you abundantly through higher dividends, periodic bonus issues and other means, and at a more accelerated pace than any time in our history," he said.

With over 340 million mobile phone subscribers, Jio is now venturing into optical-fiber-based fixed-line broadband service, called JioFiber.

"Today, I want to announce that starting September 5 of this year - on the third anniversary of Jio's launch - we are launching JioFiber services on a commercial basis," he said.

JioFiber will provide minimum internet speed of 100 mbps and plans all the way up to 1 gbps or 1,000 mbps. "We are pricing our plans at less than one-tenth the global rates, to make it accessible for all. JioFiber plans will be priced between Rs 700 to Rs 10,000 per month," he said adding like mobile services, customers will not have to pay for voice calls.

JioFiber customers opting for annual plans will get an HD or 4K LED television and a 4K set-top-box free, he said. "We are calling this the JioFiber Welcome Offer." 

Watched by his mother Kokaliben and children, he said as India is getting transformed into New India, "Reliance will also transform itself into New Reliance" 

Ambani said Reliance has invested Rs 5.4 lakh crore in the last five years for expanding and strengthening its oil to chemicals business, creating 4G wireless telecom network that offers high-speed internet and in setting up India's largest retail chain.

"We also have large and valuable real estate assets; and have a strong portfolio of financial investments," he said.

"On the strength of our existing and new growth engines, I am very confident that we can grow this by 15 per cent annually over the next five years," he stated.