Saudi Aramco and BP Plc will absorb all of Mukesh Ambani’s debt, which is $22 billion

Billionaire Mukesh Ambani’s Reliance Industries Ltd. is on a mission to reduce debt after racking up $76 billion in capital expenditure in the last five years.

The firm aims to be a zero-net-debt company in 18 months, Asia’s richest man told shareholders Monday at the Annual General Meeting. Aiding this effort the firm will sell 20% of Reliance’s oil-to-chemicals business to Saudi Arabian Oil Co. or Saudi Aramco, at an enterprise value of USD$ 75 billion.

The company will also start preparing to list retail and telecommunications units within the next five years.

Asia’s richest man, Mukesh Ambani plans to clean up his finances following years of spending on his wireless carrier, whose entry in 2016 with free calls and cheap data upended the industry and spurred a consolidation.

After spending almost USD$ 50 billion into the phone venture, which mostly runs on debt money has raised concerns among analysts including at Credit Suisse Group AG. However, Ambani’s move will look to ease those fears.

As of March 31st, Reliance had a total debt of USD$ 22 billion. His plan to carry zero debt would mean the borrowings would fall below the company’s cash reserves, a level not seen since 2013.

Shares of the company have slumped about 18% from a record reached on May 3rd.

Reliance’s debt is backed by “extremely valuable assets,” Ambani said, signaling his group isn’t prone to the kind of troubles that have been plaguing many other corporate borrowers in India.

Apart from the Aramco deal, Reliance also announced a joint venture with BP Plc this month, under which the European oil major would buy 49% of the Indian firm’s petroleum retailing business. Reliance would receive 70 billion Indian rupees under this deal.

The “commitments” from the Aramco and BP deals alone are about 1.1 trillion rupees, Ambani said, adding that Reliance will induct “leading global partners” in telecom and retail units in the next few quarters.

Source : Various