MUMBAI (Dow Jones Newswires), Aug. 11, 2011
Reliance Industries expects to receive a $5.2 billion cash payment from BP by the end of August as part of the final stage of a stake sale in 21 oil and gas blocks, said a person familiar with the matter.
"There is some paperwork to be completed and the banks have to be informed about the payments. Once these things are completed, the payment will be in a lumpsum," the person, who declined to be named, told Dow Jones Newswires.
The person declined to provide further details about the transaction, but, if converted into rupees, the payment will have a huge, positive impact on the Indian currency.
It will help support the rupee, which is under immense pressure because of rising concerns of slowing economic growth and a gaping trade deficit.
The timing is key also in that it comes at a time when a projected outflow of more than $5 billion in the coming months from domestic oil companies to settle payment arrears with Iran is expected to pressure the rupee further.
Thursday, the dollar rose to an about five-and-a-half-month high of INR45.45 against the rupee. It is now trading at INR45.25, up from INR43.85 on July 27, the lowest level since August 2008.
The payment from BP would represent about a third of the foreign direct investment into India in the first half of this calendar year.
Reliance, India's largest company by market capitalization, in February agreed to sell to BP a 30% stake in 23 oil and gas blocks for $7.2 billion plus another $1.8 billion linked to exploration successes.
But the Indian government cleared the sale of stakes in only 21 blocks, and Reliance then said it would continue to seek approval for the remaining two.
Reliance has already received a payment of $2 billion.
The remaining sum from BP will hugely boost Reliance's cash reserves, which totalled INR457.75 billion ($10.1 billion) at the end of June.
The person cited in the first paragraph of this report said the payment will reflect in Reliance's financial statements for the quarter ending Sept. 30.
Reliance Tuesday said it has received formal approval from the Indian government for the stake sale plan.
Welcoming the clearance of the deal, Mark Salt, a London-based spokesman for BP, said the company will now work toward completing the commercial agreements with Reliance and move to implementing the venture.
"As part of the final arrangements, we are also awaiting approvals from the Reserve Bank of India," Salt said, without elaborating.
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