Bahubali IPO from Aramco
Saudi Arabian Oil Co., popular as Saudi Aramco, is finally going public.
Saudi Arabian Oil Co., popular as Saudi Aramco, is finally going public. The world's largest crude oil producer and Saudi Arabia's crown jewel announced earlier this week that it would sell some of its shares on the local Riyadh Stock Exchange.
It however did not announce any further details of the Bahubali IPO, including its sale date and pricing. Speculation is rife that the oil giant may raise anywhere between $20 billion and $40 billion by selling up to two per cent stake.
Currently, China's ecommerce major Alibaba enjoys the record of world's biggest IPO as it raised close to $22 billion via initial public offer in 2014. However, it is very likely that Aramco will erase this record as oil behemoth is the world's most profitable company.
In 2018, the oil major, which accounts for 12.5 per cent of global petroleum output, posted a net profit of $111.1 billion, more than the combined profits of Google, Exxon Mobil and Apple, the world's largest companies.
In Indian currency, the Saudi Aramco's 2018 profit equals to a staggering Rs 7.8 lakh crore, which is a tad less than the entire market capitalisation of Reliance Industries, the India's diversified conglomerate owned by Mukesh Ambani, the Asia's richest person. It's revenues in 2018 stood at $356 billion (nearly Rs 25 lakh crore).
There has been speculation about Aramco's listing for the past many years. Saudi's young Crown Prince Mohammed bin Salman, who is pushing economic reforms in the oil-rich country and trying to diversify its oil-dependent economy, floated the IPO idea four years ago. At the time, he indicated that the oil giant would be valued at $2 trillion post the offer.
If his prediction comes true, the size of Saudi Aramco will be more than two-thirds of the Indian GDP. Global investment centres like London, Singapore and NSYE were touted as locations for the maiden listing of Saudi Aramco.
But the oil major chose Riyadh Stock Exchange, Saudi Arabia's local bourse, for its blockbuster debut. However, there is also talk of the company getting listed on a major stock exchange outside Saudi Arabia at later date.
Nevertheless, Saudi people are said to be selling even personal properties to mop up funds to invest in the Bahubali of IPOs. This shows the level of interest among locals on the initial offering. Investors outside the kingdom are also equally keen.
Who will lose an opportunity to invest in a company that churns out highest profits among all commercial entities on the globe?
However, there are different opinions over the final valuation of the oil giant as bankers have reportedly indicated that it will be valued up to $1.5 trillion.
Anyway, the world's largest IPO is hitting the market at a time when global economy is in a slow lane. If the IPO turns out to be a big blockbuster, it will for sure improve investor sentiment around the world, which augurs well for global economy.
Above all, the IPO will improve image of ultra conservative Saudi Arabia among global investors and the oil-rich country's reforms will get a major boost.