A minority stake sale could fetch around $10 billion to $15 billion, valuing the Indian company’s refining and petrochemicals businesses at around $55 billion to 60 billion, the report said.
The agreement on valuation could be finalized June, the Indian newspaper reported, citing people with knowledge of the development. Goldman Sachs is said to have been roped in to advise on the proposed deal, the report added.
Aramco’s interest in the operator of the world’s biggest refining complex comes after Saudi Arabia’s Crown Prince Mohammed bin Salman’s visit to Delhi in February when he said he expected investment opportunities worth more than $100 billion in India over the next two years.
Saudi Aramco’s Chief Executive Officer Amin Nasser had met Reliance Chairman Mukesh Ambani to discuss the Saudi state-owned company’s businesses including crude, chemicals and non-metallics.
On the results front, Morgan Stanley expects RIL to report a profit of Rs 9663.3 cr. Consolidated earnings is expected to declines 6% QoQ in Q4FY19, but above marginally on a year-on-year basis. EBITDA is expected higher by 14% YoY, but lower by 2% on quarter on quarter basis. “However, the quarterly report will put focus back on the energy business, considering the contribution to earnings growth and considering the above-average stock valuations,” said Morgan Stanley India in a note to clients.
Refining – Tough Quarter
Morgan Stanley estimates refinery EBITDA to decline 17%QoQ as refinery margin declines to US$8/bbl due to a lower utilization due to the planned shutdown. “Overall GRM decline should be lower than the weakness in product spreads as discounts on crude increased. Also, lower LNG prices should have supported lower operating costs. Gasoline spreads have normalized with global inventories declining, which should be margin supportive in FY20.” noted the report.
Petrochemicals- Outlook Remains Steady
Further the reports notes that on the petrochemicals side, EBITDA should decline 5% QoQ (still up 17% YoY) as polyethylene (PE) prices declined and there was softness in the polyester spreads at the start of the quarter. Also, discounts remained high in the domestic arket due to short term oversupply in PE. This coupled with weaker USD/INR should lead to a slight decline in petrochemical profitability, notes Morgan Stanley.
Telecom- Steady
The foreign brokerage firm also estimates 9% EBITDA and 5% QoQ earnings growth for the telecom business. Subscriber additions, while at high levels, have flattened at ~9.3mn/month, however ARPU should decline to Rs128/month (2% QoQ and 7% YoY), factoring in the shift in subscriber mix towards lower-priced plans. EBITDA margins should be stable at ~39% as some tailwinds from lower fuel costs are negated by a higher network rollout.
Outlook for FY20
Morgan Stanley India notes that “Improvement in refining margins, higher polyethylene prices, debt reduction and potential launch of broadband services and details around consumer business are key to earnings and stock performance.” Reliance is also looking at asset monetization as it is offloading most of its assets. “However, the details on potential asset monetization could reduce investor concerns on the balance sheet,” noted Morgan Stanley.
