Reliance Industries’ investors dump shares after Mukesh Ambani's Aramco deal fails after 27 months of negotiations

• Share price of RIL has doubled between the announcement of the deal and its recent peak on October 14.
• In August 2019, the companies had signed a non-binding letter of intent for a potential 20% stake by Saudi Aramco in RIL.
• On November 22, shares of RIL fell nearly 4% as the deal has been put on hold for now.

The much anticipated deal between Reliance Industries (RIL) and Saudi Aramco has been put on hold and the disappointment of investors is being reflected in the share price of RIL.

Both the companies, on November 20, decided to re-evaluate the proposed investment of Saudi Aramco in Mukesh Ambani’s oil-to-chemical conglomerate.

Meanwhile, shares of RIL have doubled between the announcement of the deal and its recent peak on October 14.

In August 2019, both the companies had signed a non-binding letter of intent for a potential 20% stake by Saudi Aramco in RIL.

Five instances when RIL and Saudi Aramco gave investors hope of a big ticket deal

• August 2019

RIL and Saudi Aramco signed a non-binding letter of intent in August 2019 for a potential 20% stake acquisition by Saudi Aramco in the oil-to-chemical business.

• August 2020

In a post-earnings call of Saudi Aramco with analysts, its chief executive Amin Nasser said, "With regard to the Reliance deal, all I can say at this stage, it's going through due diligence. So, depending on the due diligence, we will make our decision after we complete the due diligence on that deal," said Nasser.

• June 2021

Mukesh Ambani announced that the proposed deal with Saudi Aramco will likely be finalised this year during the 44th Annual General Meeting (AGM) on June 24. “As an important part of this vision of achieving accelerated growth, we look forward to welcoming Saudi Aramco as a strategic partner in our O2C business," said Ambani.

• July 2021

Investors' hopes of a deal to happen soon were raised after RIL appointed Saudi Aramco’s Chairman Yasir Al-Rumayyan as an independent director of the company effective from July 19, 2021.

• August 2021

CEO of Saudi Aramco Amin Nasser said the company is still working on the deal to invest in Reliance Industries, as reported by Bloomberg.

However, RIL clarified that it will continue to be Saudi Aramco's preferred partner for investments in the private sector in India and will collaborate with Saudi Aramco & SABIC for investments in Saudi Arabia. Saudi Aramco is one of the largest petroleum and natural gas companies in the world, based in Dhahran, while SABIC (Saudi Basic Industries Corporation), a subsidiary of Saudi Aramco, is into chemical manufacturing.

Analysts at JP Morgan reportedly said that the development is a “clear sentiment negative”, but will have limited impact on RIL’s financials. Besides, a significant deleveraging (debt reduction) has already been done by the oil-to-chemical major, which is positive, according to JP Morgan. The global brokerage firm has a ‘neutral’ rating on the stock as it expects the share price to rise 7% at ₹2,575.

Besides, RIL has shifted its focus to its new energy business at Jamnagar, which it aspires to make it among the largest integrated renewable energy manufacturing facilities in the world.

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