It’s now been over 2 years since talk of Aramco picking up a 20% stake in Reliance O2C business surfaced. But nothing has happened since then, except for a few murmurs.
Aramco chairman is also on board of Reliance now, so it seems like a deal is in the offing. However, this may not play out for a very interesting reason.
IOC could be far more attractive option for Aramco, because it is a bigger and more strategically important player in refining than Reliance. But more importantly, oil is still the only play for IOC, whereas for Reliance, it is rapidly becoming a side show! Why should Aramco get into bed with Reliance when Reliance looks like it has one foot out already?
In terms of valuations also, IOC could be far more attractive bet for Aramco. The $15B that is being talked about, would be enough to buy entire company in IOC, whereas it just gets 20% of Reliance O2C business.
But there is another reason - Aramco has a massive $75B Annual Dividend commitment which could become difficult to manage at low oil prices. But IOC’s dividend yield is actually even higher than Aramco’s obligation - so investing in IOC could help solve Aramco’s dividend problem to an extent!
When you combine these facts, IOC could be the dark horse that comes from behind and wins the Aramco investment race!
And if that happens, IOC will obviously shoot higher!
Aramco chairman is also on board of Reliance now, so it seems like a deal is in the offing. However, this may not play out for a very interesting reason.
IOC could be far more attractive option for Aramco, because it is a bigger and more strategically important player in refining than Reliance. But more importantly, oil is still the only play for IOC, whereas for Reliance, it is rapidly becoming a side show! Why should Aramco get into bed with Reliance when Reliance looks like it has one foot out already?
In terms of valuations also, IOC could be far more attractive bet for Aramco. The $15B that is being talked about, would be enough to buy entire company in IOC, whereas it just gets 20% of Reliance O2C business.
But there is another reason - Aramco has a massive $75B Annual Dividend commitment which could become difficult to manage at low oil prices. But IOC’s dividend yield is actually even higher than Aramco’s obligation - so investing in IOC could help solve Aramco’s dividend problem to an extent!
When you combine these facts, IOC could be the dark horse that comes from behind and wins the Aramco investment race!
And if that happens, IOC will obviously shoot higher!
