Reliance Still Seeks Downstream Investment Partners

Reliance Industries has plenty of cash these days but it is still seeking strategic partners and investor capital for its oil-to-chemicals business as it seeks to achieve net-zero carbon emissions by 2035 (IOD Feb.23'21). The Indian conglomerate raised $36 billion in the financial year ended Mar. 31 through a rights issue of shares to existing shareholders and the sale of stakes in its Jio digital services unit and its retail business. Those transactions helped make Reliance debt free on a net basis, Chairman Mukesh Ambani said in the company's latest annual report. "We now have a strong balance sheet with high liquidity that will support growth plans for our three hyper-growth engines -- Jio, Retail and [oil-to-chemicals]," Ambani said. Talks With Saudi Aramco Drag On Reliance is still talking to Saudi Aramco about the possible sale of a 20% stake in the oil-to-chemicals unit, but it is also taking steps to facilitate the entry of other investors. Talks with Aramco started in 2019 and were originally expected to be concluded by March 2020 (IOD Aug.13'19). A deal with the Saudi oil giant would have helped Reliance to reduce its debt, which had soared to $22 billion by Mar. 31, 2020 as a result of the expansion of the conglomerate's digital services and retail businesses. But a series of other transactions have since wiped out Reliance's debt, making a deal with Aramco less critical. Analysts at financial services firm Jefferies said in a recent research note that the outlook for Reliance's oil-to-chemicals business is promising, which should boost its valuation and any proceeds from a share sale. However, China has been ramping up its refining and petrochemical capacity, so margins could come under pressure in the coming years, which may prompt Reliance to sell a stake sooner rather than later. Reliance's oil-to-chemicals business includes the Jamnagar refining complex with a capacity of 1.4 million barrels per day in the western state of Gujurat -- the world's largest -- as well as petrochemical plants at eight locations in India. Retail Fuel Venture With BP The oil-to-chemicals business also includes Reliance's retail fuel sales joint venture in India with UK major BP, in which Reliance holds a 51% stake. The joint venture is working toward its goal of expanding from over 1,400 locations to 5,500 by 2025. In addition to conventional petroleum fuels, it offers charging infrastructure for electric vehicles. Testing of battery swap stations for electric vehicles has started at more than two dozen locations and Reliance said the initial response has been encouraging. Reliance said India's demand for refined products will be constrained in the short term by the recent surge of Covid-19 infections in the country, but that long-term demand is expected to be strong (IOD Jun.1'21). Rakesh Sharma, New Delhi