Saudi state oil company Aramco's IPO prospectus launched on Sunday lists purchasing 20 percent stake in India's Reliance Industries Limited (RIL), oil, chemical markets and expansion in high growth markets in potentially world's largest company valuation range between $1.2 trillion to $2.3 trillion.
Under the column for proposed acquisitions, RIL was listed in the 658-page prospectus released by Aramco on Sunday. "The Company has recently entered into non-binding agreements regarding the expansion of its downstream business in Asia, including entering into a non-binding letter of intent with Reliance Industries Limited on August 12, 2019, to purchase a 20 per cent stake in its oil to chemicals division," the document read, according to IANS.
Saudi Aramco will also be expanding into India in a bid to expand business in high growth markets in south-east Asia. "Furthermore, the Company intends to enhance its domestic and global marketing businesses to support the position of its upstream business in key, high-growth geographies, including China, India and Southeast Asia, which are integral to the Company's existing business and future expansion strategy."
The huge business move began on November 3 when Aramco began the initial public offering (IPO) after the Saudi Crown Prince Mohammed bin Salman planned it four years ago. The Saudi government is seeking to raise billions of dollars in a bid to diversify the Saudi economy through investments in non-energy industries.
Known to be one of the most profitable companies in the world valuation at the upper end of the range of $2 trillion, the offering for institutional investors will begin on November 17 and end on December 4, according to Reuters. Retail investors will be able to bid for the shares from November 17 to November 28, the prospectus read.
Analysts have stated that at the top valuation of $2 billion, Aramco could raise $40 billion and dethrone Chinese e-commerce giant Alibaba's $25 billion record-breaking valuation in 2014.
Saudi Crown Prince stated the valuation of Aramco would be at least twice that of Microsoft, the world's most valuable listed company. and seven times that of Exxon Mobil Corp which the biggest oil major listed in market capitalisation.
Aramco said that it has high operating cash flow, Free Cash Flow, earnings before interest and taxes (EBIT), Earnings before interest, tax, depreciation and amortization (EBITDA) and Return on Average Capital Employed (ROACE) than each of the five major international oil companies -- collectively, the "Five Major IOCs", comprising ExxonMobil, Shell, Chevron, Total and BP.
The prospectus also said that it has a lower gearing (ratio of net debt (total borrowings less cash and cash equivalents) to net debt plus total equity) than each of the Five Major IOCs.
Amin H. Nasser, President and CCEO of Saudi Aramco, said: "Saudi Aramco's vision is to be the world's pre-eminent integrated energy and chemicals company. Over the last three years, we were responsible for one in every eight barrels of crude oil produced globally and our proved liquids reserves, at the end of 2018, were five times larger than the combined proved liquid reserves of the Five Major IOCs. We are a steadfast contributor to the world's energy security."
(With inputs from news agencies.)