Lyondell deal will up RIL's refining margins: Experts

Reliance Industries, India's biggest-listed group, is planning to offer USD 10 billion to acquire a controlling stake in LyondellBasell, the bankrupt Dutch-based US petrochemical giant, in what would be one of the largest offshore acquisition by an Indian company, said people familiar with the matter.

The Indian conglomerate controlled by Mukesh Ambani, India's richest man according to Forbes, said on Saturday that it had submitted a preliminary non-binding cash offer to LyondellBasell and it added that it was reviewing a number of global opportunities for growth in its core business.

"We have to finalise a few points but Reliance is preparing to put USD 10 billion on the table," a person close to the group told the Financial Times. Another one person familiar with the deal said: "USD 10 billion is about right, give or take USD 1 billion".

Experts react

Experts attached with local and international brokerages view the development as positive. “Over the last couple of years, RIL’s petrochemical business was a cause of worry. This particular move should assuage investor concerns on that business,” said Portfolio Manager PN Vijay.

Vijay said there were some concerns when RIL promoters sold treasury stock and now the management was keeping its word when it had promised some global acquisitions.

“The RIL stock too has been doing well in the last two weeks compared to the battering it received since June. It is still not on our buy list yet because of the huge overhang of the Supreme Court case [relating to gas] but this is surely a positive development.”

‘How you read the deal is a function of the price RIL pays,” said Adrian Mowat of JPMorgan.

“We suspect they will be pretty cautious in the price that they are willing to pay.”

Mowat added that RIL’s refining margins, which were currently under pressure, would improve if the Lyondell acquisition went through.

— With inputs from agencies