 "Global ambition: Al-Rumayyan's onboarding just the start for RIL")
The induction of Saudi Aramco Chairman Yasir Al-Rumayyan into the Reliance Industries (RIL) board is the beginning of increased synergies between the two energy majors.
Saudi Aramco will also get a board seat (or two) in RIL’s newly carved out oil to chemicals (O2C) subsidiary. This proposed deal is largely for a stake in RIL’s prolific Jamnagar refinery, which is among the most advanced in the world. Aramco will buy a 20 per cent stake in RIL’s O2C subsidiary. The enterprise value of this division was estimated at $75 billion. This is in addition to Saudi Arabia’s Public Investment Fund (PIF) having a 2.04 per cent stake in Reliance Retail and a 2.32 per cent equity in RIL’s Jio Platforms. Al-Rumayyan is governor of the PIF.
Al-Rumayyan’s reach goes beyond Aramco
Aramco has been pitching for a distinct identity for itself from Saudi Arabia, industry watchers say. This conscious but subtle divergence has gained pace after Aramco’s initial public offering (IPO) in December 2019. For operational decisions, Amin Hassan Nasser is president and chief executive officer of Saudi Aramco, a post he has held from 2015.
Al-Rumayyan represents Saudi Arabia and his presence on the RIL board would not just be because he is Aramco chairman. It is said his being on the RIL board would put the company in the ranks of key multinationals. Al-Rumayyan is also on the board of British semiconductor and software design company Arm Holdings, Uber Technologies, and SoftBank group.
RIL’s board seat sharing
According to RIL officials, Al-Rumayyan can be an independent director because the stake buy deal is for a subsidiary of RIL and not the parent company. He will be the first non-Indian director on the RIL board. In earlier deals, such as the ones with Google and Facebook, RIL had offered directorships to investors in its subsidiaries.
On Jio Platforms, David Fischer is from Facebook and Donald Harrison is from Google. Google and Facebook bring in technologies while Jio gives them access to the Indian market.
The number of seats that Aramco gets in the O2C subsidiary is part of the negotiations between the two companies. For now, Aramco is said to be offering crude oil supplies and money for the share of RIL’s O2C business.
Over and above the board
Speaking at RIL’s 44th annual general meeting (AGM), Chairman and Managing Director Mukesh Ambani said: “We look forward to welcoming Saudi Aramco as a strategic partner in our O2C business. I expect our partnership to be formalised in an expeditious manner during this year.”
This set the timeline for the much-anticipated investment. He also said that Al-Rumayyan’s inclusion in the company board was the first step towards the “internationalisation” of RIL.
Ambani did not elaborate on what he meant by internationalisation. At Rs 1.45 trillion ($19.9 billion), RIL is India’s largest exporter, accounting for 6.8 per cent of the country’s merchandise exports, spreading across 107 countries.
“If Al-Rumayyan or some representative of Aramco had come just on the O2C subsidiary’s board, then we could assume that the synergies between the two companies are limited to the refinery business. But on the RIL board, Al-Rumayyan has a much greater play, indicating more interaction between the two groups,” Harsh Dole, vice-president, IIFL (India Infoline Group), told Business Standard.
“It seems RIL is going to establish a full value chain of renewable energy in India and then take it international. The world is looking for reliable renewable energy suppliers, a space that RIL can be eyeing.
There is also potential for globalising RIL’s in-house developed 5G technologies. Al-Rumayyan, by virtue of Saudi Arabia’s global reach, can be a key partner for RIL in these endeavours,” Dole added.
These ideas align with Saudi Arabia’s own plans too. The kingdom said it would generate half its energy from renewables by 2030 and reports suggest that it is the largest 5G adopter in the Gulf region.
Saudi Aramco will also get a board seat (or two) in RIL’s newly carved out oil to chemicals (O2C) subsidiary. This proposed deal is largely for a stake in RIL’s prolific Jamnagar refinery, which is among the most advanced in the world. Aramco will buy a 20 per cent stake in RIL’s O2C subsidiary. The enterprise value of this division was estimated at $75 billion. This is in addition to Saudi Arabia’s Public Investment Fund (PIF) having a 2.04 per cent stake in Reliance Retail and a 2.32 per cent equity in RIL’s Jio Platforms. Al-Rumayyan is governor of the PIF.
Al-Rumayyan’s reach goes beyond Aramco
Aramco has been pitching for a distinct identity for itself from Saudi Arabia, industry watchers say. This conscious but subtle divergence has gained pace after Aramco’s initial public offering (IPO) in December 2019. For operational decisions, Amin Hassan Nasser is president and chief executive officer of Saudi Aramco, a post he has held from 2015.
Al-Rumayyan represents Saudi Arabia and his presence on the RIL board would not just be because he is Aramco chairman. It is said his being on the RIL board would put the company in the ranks of key multinationals. Al-Rumayyan is also on the board of British semiconductor and software design company Arm Holdings, Uber Technologies, and SoftBank group.
RIL’s board seat sharing
According to RIL officials, Al-Rumayyan can be an independent director because the stake buy deal is for a subsidiary of RIL and not the parent company. He will be the first non-Indian director on the RIL board. In earlier deals, such as the ones with Google and Facebook, RIL had offered directorships to investors in its subsidiaries.
On Jio Platforms, David Fischer is from Facebook and Donald Harrison is from Google. Google and Facebook bring in technologies while Jio gives them access to the Indian market.
The number of seats that Aramco gets in the O2C subsidiary is part of the negotiations between the two companies. For now, Aramco is said to be offering crude oil supplies and money for the share of RIL’s O2C business.
Over and above the board
Speaking at RIL’s 44th annual general meeting (AGM), Chairman and Managing Director Mukesh Ambani said: “We look forward to welcoming Saudi Aramco as a strategic partner in our O2C business. I expect our partnership to be formalised in an expeditious manner during this year.”
This set the timeline for the much-anticipated investment. He also said that Al-Rumayyan’s inclusion in the company board was the first step towards the “internationalisation” of RIL.
Ambani did not elaborate on what he meant by internationalisation. At Rs 1.45 trillion ($19.9 billion), RIL is India’s largest exporter, accounting for 6.8 per cent of the country’s merchandise exports, spreading across 107 countries.
“If Al-Rumayyan or some representative of Aramco had come just on the O2C subsidiary’s board, then we could assume that the synergies between the two companies are limited to the refinery business. But on the RIL board, Al-Rumayyan has a much greater play, indicating more interaction between the two groups,” Harsh Dole, vice-president, IIFL (India Infoline Group), told Business Standard.
“It seems RIL is going to establish a full value chain of renewable energy in India and then take it international. The world is looking for reliable renewable energy suppliers, a space that RIL can be eyeing.
There is also potential for globalising RIL’s in-house developed 5G technologies. Al-Rumayyan, by virtue of Saudi Arabia’s global reach, can be a key partner for RIL in these endeavours,” Dole added.
These ideas align with Saudi Arabia’s own plans too. The kingdom said it would generate half its energy from renewables by 2030 and reports suggest that it is the largest 5G adopter in the Gulf region.
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