Mukesh Ambani
Reliance, in its statement, reiterated that it'll continue to be Aramco's preferred partner in India Image Credit: AP

Reliance Industries Ltd scrapped a plan announced more than two years ago to sell a 20 per cent stake in its oil-to-chemicals unit to Saudi Aramco as the Indian company focuses on its renewable energy investments.

“Due to evolving nature of Reliance’s business portfolio, Reliance and Saudi Aramco have mutually determined that it would be beneficial for both parties to re-evaluate the proposed investment in O2C business in light of the changed context,” the Indian company said in a late Friday statement. It will also shelve plans to spin off this business into a separate entity.

The announcement puts brakes on a deal that was two years in the making and underscores the pivot underway at Reliance, helmed by billionaire Mukesh Ambani, toward green energy. The Aramco deal, Ambani had told shareholders in 2019, would be the biggest ever investment in an Indian company and forge a closer alliance between the world’s biggest oil exporter and India’s most largest company by market value.

Reliance and Saudi Aramco signed a non-binding letter of intent in August 2019 for a potential 20 per cent stake in Reliance’s oil-to-chemicals unit valued at about $15 billion. But since then, Reliance has shifted its focus to include a plan for developing one of the largest integrated renewable energy manufacturing facilities in the world. The complex would consist of solar photovoltaic module, battery, green hydrogen and fuel cell factories.

Reliance, in its statement, reiterated that it’ll continue to be Aramco’s preferred partner in India and “is committed” to a pact with Aramco, without specifying the contours of what the partnership may now look like.

Ambani pledged in June to spend $10 billion on alternative energy over three years, in an attempt to transform Reliance that still gets nearly 60 per cent of its revenue from fossil-fuel related businesses. It acquired a Norwegian solar panel maker and an Indian builder of renewable projects last month in a bid to extend its dominance into alternative energy. Reliance has a target to be carbon net-zero by 2035.

Reviving hopes

As recently as June this year, Reliance said it expected to finalise the investment deal with Aramco and appointed latter’s chairman Yasir Al Rumayyan an independent director on its board. That revived hopes of the deal coming through after Ambani, Asia’s richest person, said in 2020 that the pandemic and its impact on fuel demand had created hurdles for the transaction.

Reliance’s urgency for a stake sale in its energy business ebbed out as it received investments in its consumer businesses last year.

Reliance, which is also India’s most profitable company, raised more than $27 billion last year from global investors, including Facebook Inc. and Google, through stake sales in its retail and digital ventures. Its energy partner BP Plc paid $1 billion for 49 per cent in a fuel retailing venture. All these transactions helped Ambani make Reliance a zero-net-debt company in 2020, months ahead of its announced deadline.