Aramco IPO to go ahead by early 2021

I believe it will be above $2 trillion, Crown Prince Mohammed bin Salman told Bloomberg. (SPA)
Updated 06 October 2018

Aramco IPO to go ahead by early 2021

  • The investor will decide the price on the day. I believe it will be above $2 trillion, says Crown Prince Mohammed bin Salman
  • Saudi Arabia has been planning to float up to 5 percent of Saudi Aramco, the world’s largest national oil company, on the stock market

LONDON: Saudi Crown Prince Mohammed bin Salman said the flotation of Saudi Aramco would proceed by 2021, Bloomberg reported on Friday.

He made the disclosure in a wide-ranging interview with the newswire conducted at the royal palace in Riyadh on Wednesday.

It also touched on his relationship with Donald Trump, plans to invest a further $45 billion in Softbank, the rising oil price, and production of crude along the Saudi border with Kuwait.

His comments bring clarity to what could be the most talked about initial public offering in corporate history and one that is a key plank of the Vision 2030 economic and social reform agenda.

“I believe late 2020, early 2021,” he said, referring to the timing of the IPO. “The investor will decide the price on the day. I believe it will be above $2 trillion. Because it will be huge.”

Saudi Arabia has been planning to float up to 5 percent of Saudi Aramco, the world’s largest national oil company, on the stock market.

In recent months there had been intense media speculation over whether the planned IPO had been delayed, canceled or replaced with a rival deal involving Aramco purchasing Saudi Basic Industries Corporation, the petrochemical giant better known as SABIC.

The Saudi crown prince told Bloomberg that the Saudi government would retain the shares of Aramco after the IPO, instead of transferring them into the sovereign wealth fund as originally planned.

Instead, the Public Investment Fund (PIF) would receive the $70 billion from the sale of its stake in SABIC, plus the $100 billion that country hopes to raise from the Aramco IPO, Bloomberg reported.

The Bloomberg interview also touched on future oil production in the so-called Saudi-Kuwait neutral zone. (Bloomberg)

The interview took place against a backdrop of market concerns over the rising price of oil, caused in part by the reimposition of US sanctions against Iran.

US president Donald Trump has in recent weeks stepped up pressure on OPEC and Saudi Arabia to pump more crude and help to lower the price of oil.

However, the crown prince stressed that the oil price was determined by market forces rather than the actions of Saudi Arabia.

“We never in the history of Saudi Arabia decided that this is the right or wrong oil price,” he said.

“The oil price depends on trade — consumer and supplier — and they decide the oil price based on trade and supply and demand. What we are committed in Saudi Arabia is to make sure there is no shortage of supply. So we work with our allies in OPEC and also non-OPEC countries to be sure that we have a sustainable supply of oil and there is no shortage and that there is good demand, that it will not create problems for the consumers and their plans and development.”

He also clarified that Saudi Arabia had spare capacity of 1.3 million barrels without the need for further investment.

“So in Saudi Arabia we have 1.3 million to go if the market needs that. And with other OPEC countries and non-OPEC countries we believe we have more than that, a little bit more than that. And of course there is opportunity for investment in the next three to five years,” he said.

The Bloomberg interview also touched on future oil production in the so-called Saudi-Kuwait neutral zone — an undefined border area between the two countries.

“There are only small issues that have been stuck there for the last 50 years. The Kuwaiti side, they want to fix it today, before we continue to produce in that area,” he said. “It’s part of the sovereignty issues that are stuck, unsolved, between Saudi Arabia and Kuwait for the past 50 years. And they want to fix it now before we continue to produce from that area. We think a 50-year-old issue is almost impossible to fix in a few weeks. So we’re trying to have an agreement with the Kuwaitis to continue to produce for the next five to 10 years and at the same time, we work on the sovereignty issues.”

The interview also covered recent reports about planned financial aid from Saudi Arabia, the UAE and Kuwait for neighboring Bahrain.

“We cannot walk away from GCC countries. It (the financial package) will cover Bahrain’s needs over five years. We believe they’ve taken really serious reforms in the past year. We believe they’ve made huge progress. They have a super amazing team. I told the Bahraini king and the Bahraini crown prince if you fire any of the people in Bahrain we will hire them next day," he said.

India probes Flipkart, Amazon discounts after retailers complain

Updated 15 October 2019

India probes Flipkart, Amazon discounts after retailers complain

  • Products on Amazon, Flipkart listed at steep discounts in sale
  • Trader groups allege firms violating foreign investment rules

NEW DELHI: The Indian government is looking into whether hefty discounts offered on Walmart-owned Flipkart and during their online festive sales violate foreign investment rules, a commerce ministry official told Reuters.
India introduced new rules in February aimed at protecting the 130 million people dependent on small-scale retail by deterring big online discounts. The rules forced e-commerce firms to tweak their business structures and drew criticism from the United States, straining trade ties between New Delhi and Washington.
While Amazon and Flipkart say they’ve complied with the federal rules, local trader groups say the two companies are violating them by burning money to offer discounts — of more than 50 percent in some cases — during the ongoing festive sales.
Reuters reviewed emails and internal training material from Flipkart showing the company is in some cases offering to reduce, or forfeit, its sales commission from sellers that offer discounts.
The commerce ministry official said the government was reviewing complaints and evidence filed by the Confederation of All India Traders (CAIT), a group representing some 70 million brick-and-mortar retailers, alleging Amazon and Flipkart were violating the foreign investment rules.
The official declined to comment on possible action, but executives from Amazon and Flipkart were summoned to meet commerce ministry officials last week to discuss the matter.
Flipkart in a statement said it had a “good meeting” with government officials and it was “deeply committed to doing business the right way in India.”
Amazon said it had an “open & transparent discussion” with officials and has a high bar for compliance.
Seeking to attract shoppers around the key Hindu festival of Diwali, both retailers have placed full-page advertisements in top national daily the Times of India to showcase discount offerings stretching from Samsung and Apple phones to clothing and diapers.
“Customers are going online because of the unbelievable discounts. Because of this sales at offline businesses are down 30 percent to 40 percent this month,” CAIT’s secretary general Praveen Khandelwal said.
Two emails received by Flipkart sellers in September, just days ahead of the inaugural phase of the festive sales, showed it offering to partly fund discounts.
The company would “burn” 3 percent of the discount if a seller lowered a product price by 15 percent, or 9 percent if the seller discounted by 30 percent, said one of the emails.
In training material posted on Flipkart’s restricted website for its sellers, seen by Reuters, the company asks them to prepare for the festive season by saying “nothing is bigger than this” and explaining how they can benefit by discounting products for Flipkart’s premium customers.
“We want to ensure that you fetch as much profit from it as possible ... whatever the discount you are offering, half of that will be reimbursed to you by Flipkart,” a post said.
A Flipkart source said the incentives were compliant with Indian regulations and were aimed at promoting sellers’ earnings by effectively reducing the commission they pay.
All India Online Vendors Association, whose 3,500 members sell products on various online platforms including Flipkart, in a statement said fewer than 100 of its members benefitted from Flipkart’s partial discount funding, giving some sellers an unfair advantage.