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MarketScreener Homepage  >  Equities  >  Saudi Arabian Stock Exchange  >  Saudi Basic Industries Corporation    2010   SA0007879121

SAUDI BASIC INDUSTRIES CORPORATION

(2010)
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Reliance's stake sale talks with Aramco stall over price, sources say

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07/16/2020 | 07:50am EDT
FILE PHOTO: A bird flies past a Reliance Industries logo installed on its mart in Ahmedabad

Talks over the sale of a 20% stake in Reliance Industries Ltd's oil-to-chemical business to Saudi Aramco have stalled over price, four sources familiar with the matter said.

With the energy market hit by falling demand for crude due to COVID-19, Aramco wants the Indian conglomerate to review the $15 billion it agreed to sell the stake for last year, the sources told Reuters.

"Aramco has told Reliance that refining margins are terrible and are expected to remain subdued in Q3 at least, so they can't pay the price they have agreed pre-COVID," one of the sources said.

"In reality, Aramco does not have the money."

A second source said Reliance would wait for the market to recover rather than settling for a "drastic" revaluation of the asset.

Reliance did not respond to Reuters' emails seeking a response to the sources' comments, while Aramco declined comment.

The initial deadline for completion of the deal was March 2020.

Reliance Chairman Mukesh Ambani told shareholders on Wednesday it had been delayed due to "unforeseen circumstances in the energy market and the COVID-19 situation".

The Indian firm, however, remained committed to a long-term partnership with Aramco, he added.

Like other global players in a market awash with oil, Aramco, the world's top oil exporting firm, has seen revenues slide on fallout from the epidemic.

It had to extend the $69.01 billion payment schedule for a 70% stake in SABIC by three years to 2028 to be able to pay shareholder dividends in the region of $75 billion this year.

Reliance, which operates the world's biggest refining complex in western India, planned to use the proceeds from the Aramco deal to settle a part of a multi-billion-dollar debt.

However, in the meantime Reliance has secured investment from companies including Google, Facebook, Intel and Qualcomm QCOM.O for its digital platform Reliance Jio, helping it become net-debt free.

"Our equity requirements have already been met," Ambani said.

Reliance remained committed to a long-term partnership with Aramco and would spin off its oil-to-chemical business into a separate subsidiary to facilitate that. "We expect to complete this process by early 2021," Ambani said.

Reliance has also been approached by global companies for strategic partnerships in its petrochemical business, including in utilizing these feedstocks, Ambani said.

(Additonal Reporting by Maha El Dahan, editing by John Stonestreet)

By Nidhi Verma, Clara Denina and Saeed Azhar
Stocks mentioned in the article
ChangeLast1st jan.
ALPHABET INC. 1.80% 1507.24 Delayed Quote.10.54%
FACEBOOK 1.47% 259.89 Delayed Quote.24.79%
INTEL CORPORATION 2.08% 49.19 Delayed Quote.-19.48%
LONDON BRENT OIL 1.75% 45.3 Delayed Quote.-31.89%
QUALCOMM, INC. 6.40% 115.79 Delayed Quote.23.35%
RELIANCE INDUSTRIES LTD -0.29% 2127.6 End-of-day quote.40.52%
SAUDI ARABIAN OIL COMPANY -0.45% 33.15 End-of-day quote.-5.96%
SAUDI BASIC INDUSTRIES CORPORATION 0.34% 88.2 End-of-day quote.-6.07%
WTI 2.37% 42.55 Delayed Quote.-31.52%
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Financials
Sales 2020 114 B 30 296 M 30 296 M
Net income 2020 6 223 M 1 659 M 1 659 M
Net Debt 2020 11 424 M 3 046 M 3 046 M
P/E ratio 2020 42,5x
Yield 2020 5,01%
Capitalization 265 B 70 554 M 70 558 M
EV / Sales 2020 2,43x
EV / Sales 2021 2,16x
Nbr of Employees 35 000
Free-Float 100%
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Mean consensus UNDERPERFORM
Number of Analysts 13
Average target price 74,05 SAR
Last Close Price 87,90 SAR
Spread / Highest target 2,39%
Spread / Average Target -15,8%
Spread / Lowest Target -38,6%
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Managers
NameTitle
Yousef bin Abdullah Al-Benyan Vice Chairman & Chief Executive Officer
Abdulaziz bin Saleh M. Al-Jarbou Chairman
Timothy D. Leveille Executive Vice President-Corporate Finance
Bob Maughon Executive Vice President-Technology & Innovation
Abdullah Mohammed bin Ibrahim Al-Issa Non-Executive Director
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