How is the deal structured?
The oil-to-chemicals (O2C) business, which includes refining, petrochemical and our 51% stake in fuel retail joint venture (with BP), will be carved out into a division where Aramco will have an economic interest. It will be ring-fenced, with its own board, key management personnel and accounts; any deals with the rest of RIL will be on an arm’s length. The instruments that we will issue to Aramco for their investment will comply with Securities and Exchange Board of India and other regulatory norms. What will be the instrument and its terms will be decided between both parties. Aramco will pay RIL $15 billion. If the O2C board will have five members, two seats will be given to Aramco.
What is the timeframe for the deal closure?
It will take four months for due diligence and signing of a definitive agreement. The regulatory approvals would be only for the financial instrument, so it will not take much time. If we were to carve it out in a separate company, it would have taken a very long time to get permissions. Our target is to complete this by March. We have committed that this business would be a standalone entity in five years. If RIL and Aramco decide it should be listed at some later time, they may do so; there is no decision yet.
What would be the payment schedule for the deal?
This deal is similar to the contours of the Aramco deal to buy a stake in Saudi Basic Industries Corporation; there will be deferred payment — 50% of the money will be paid on closing, another 25% will be paid after one year of closing and the balance 25% in the next year. We are not desperate to get money upfront. It’s a strategic deal, not a debt reduction deal. The money will go to RIL treasury; how they deploy it efficiently is their call. We know there will be no more major capex, but whether they use it to repay debt or if there are better opportunities to create value, they will do that.
Are there any other privileges Aramco will get?
They will have a key management position in O2C, and a board seat at RIL. We have committed that the chief operating officer will be from Aramco, but not CFO or CEO.
Saudi Aramco will also supply crude oil on a long-term basis to RIL’s Jamnagar refinery. Is RIL getting a discounted rate?
RIL just completed a capex cycle for the O2C business. Would you look at further expansion after the Aramco partnership?
They are not coming here to be static. We both believe in the oil-to-chemicals business. The world’s appetite, particularly that of India, for materials is increasing. There is demand and we have the building blocks, our refinery has enough feedstock available to make more of chemicals. We have scope for brownfield expansion, so the capex required would be much lower.
Is RIL becoming a holding company?
It is, but more importantly, we are forging partnerships, whether it is with kirana stores, B2B, or SME. We really want to build partnerships for mutual benefits, but also for the benefit of India and Indian consumers, entrepreneurs and in the process we want to create societal value.