RIL, Saudi Aramco re-evaluate O2C investment, hive-off; what should investors do?

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26 Aug, 2025 12:21

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Reliance Industries' (RIL) share price fell 4 percent in early trade on November 22 after the company and Saudi Aramco decided to re-evaluate the proposed investment in O2C business in light of the former's energy forays.

"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," Reliance Industries said in its press release on November 19.

"Consequently, the current application with NCLT for segregating the O2C business from RIL is being withdrawn," the company added.

RIL shall continue to be Saudi Aramco’s preferred partner for investments in the private sector in India, and will collaborate with Saudi Aramco and  chemical manufacturer SABIC for investments in Saudi Arabia, it said.

Reliance Industries and Saudi Aramco signed a non-binding Letter of Intent in August 2019 for a potential 20% stake acquisition by Saudi Aramco in the former's O2C business.

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Here's what brokerages said about Reliance Industries and its stock:

Nomura

Maintain neutral rating on the stock with a target at Rs 2,850 per share.

There will not be an O2C stake sale or de-merger soon, and the company will re-evaluate the proposed investment by Aramco in the O2C business with focus on new energy.

The debt is not a concern anymore, and the withdrawal is unlikely to affect the valuation of the company’s O2C business.

The outlook remains strong for all segments for H2FY22.

Jefferies

The broking firm has maintained a buy rating, but lowered its target price to Rs 2,880 from Rs 3,000 per share.

Both the parties deciding to not proceed with the proposed transaction comes as a disappointment given that crude is at $80 per barrel and Aramco's chairman is on RIL's board.

It fails to set a benchmark of $75 billion valuation for the O2C business. However, the withdrawal has no bearing on RIL's balance sheet, which has benign leverage.

JPMorgan

Maintain neutral call with a target at Rs 2,575 per share.

The O2C decision is a clear negative for the sentiment, but will have limited financial impact since RIL has already achieved significant de-leveraging.

Prabhudas Lilladher

RIL and Saudi Aramco's decision to not proceed with the proposed stake sale is negative as it would have given RIL access to the latest petrochemicals technologies along with assured crude supplies.

RIL has made strong moves towards its net-zero plan by 2035 and investments in solar energy, advanced energy storage, electrolyser and fuel cell.

We have ascribed $81 billion valuation to its O2C business (which is at a 9% premium to the earlier deal value), and did not factor in any benefit from the deal pending finalisation. Accordingly, our valuation remains unchanged.

RIL’s well diversified business model makes it a perfect growth story. It is well positioned to incubate new businesses and pursue inorganic opportunities with a liquid balance sheet. Maintain 'buy’ with a price target of Rs 2,955.

At 09:18 hrs Reliance Industries was quoting at Rs 2,394.15, down Rs 78.60, or 3.18 percent on the BSE.

The share touched a 52-week high of Rs 2,750 and a 52-week low of Rs 1,830.00 on 19 October, 2021 and 29 January, 2021, respectively.

Currently, it is trading 12.94 percent below its 52-week high and 30.83 percent above its 52-week low.

(Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.)

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.