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Mukesh Ambani’s plans to make Reliance Industries debt-free hit snags

Six months after Mukesh Ambani laid out a road map to make Reliance Industries Ltd. free of net debt by early 2021, his plan has hit a few bumps thanks to the government.

Prime Minister Narendra Modi’s administration has petitioned a court to halt a proposed stake sale by Reliance Industries to Saudi Arabian Oil Co., threatening a key source of funds needed to pare liabilities. In addition, the conglomerate, which is into oil refining, telecommunications and retail, is also facing unfriendly tax proposals that could hit its businesses.

Shares of the company have slid almost 9% since reaching a record high in mid-December. A spokesman for Reliance Industries declined to comment. Here are four challenges the company is facing:

Aramco deal delay:

Ambani told shareholders in August that Reliance Industries would sell 20% of its oil and petrochemicals unit to Aramco in a deal valuing the business at $75 billion. The sale is crucial to reduce the group’s net debt, which was about $22 billion at the end of March 2019.

But in December, the government requested a court to stop the proposed sale to help ensure the Mumbai-based company has enough assets to pay claims in an arbitration case related to profit sharing and royalty payments between Reliance Industries and its partners. Reliance Industries says the government’s plea isn’t tenable legally and should be dismissed.

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