India’s Reliance Industries has started spinning off its new oil-to-chemicals operation into an independent unit with a $25 billion loan from the parent company.
The latest move marks the efforts of billionaire owner Mukesh Ambani to unlock the value of his businesses.
The wholly owned unit’s assets will be funded by the interest-bearing loan, which will be an “efficient mechanism to upstream cash, including any potential capital receipts,” in the unit, according to a presentation the company filed with the stock exchanges.
Bringing in investors
Last year the oil-to-chemicals contributed more than 60 percent to the group’s revenue that’s been lately expanding into consumer businesses such as technology and retail. Splitting the business will make it easier for Mr. Ambani to bring in investors and help complete a proposed stake sale to Saudi Arabian Oil Company (Saudi Aramco).
Creating the unit “facilitates participation by strategic and financial investors for value discovery and unlocking,” Reliance Industries said. It expects the separation to be completed by September 2021. Approvals have been received from the markets regulator and stock exchanges, and the company will seek a nod from shareholders and creditors in the first quarter of the year starting April, it said.
Mr. Ambani amassed more than $27 billion last year from global investors including tech giants like Facebook and Google through stake sales in his retail and digital ventures, turning Reliance net-debt-free. He has promised to offer 5G services on his wireless network as early as this year and expand into cleaner fuels to ride the global energy transition.
Reliance has spun out separate units twice earlier for funding two refineries on India’s west coast. The entities were merged with the parent on the completion of the plants, which can together now process 1.4 million barrels of crude daily, making it the world’s biggest oil refining complex.