Aramco Ipo: Guide For Indian Investors

Saudi Aramco, the world's largest integrated oil and gas company, announced its intention to proceed with an initial public offering (IPO) on the Main Market of Tadawul, the local stock exchange in Saudi Arabia, in November 2019. This move presented a unique opportunity for investors to own a part of this mega-corporation. However, for Indian investors, participating in the IPO posed certain challenges due to limited options for investing in overseas markets, particularly in Saudi Arabia. While Indian citizens could still invest in the IPO, their chances were restricted. In this context, let's explore the topic of How to Invest in Aramco IPO from India to understand the avenues available for Indian investors to participate in this historic offering.

Research and educate yourself about Aramco's business, financial performance, and growth prospects

Researching and educating yourself about a company before investing is always a good idea. Here is some information about Aramco's business, financial performance, and growth prospects to help you get started.

Aramco's Business

Aramco, or Saudi Aramco, is one of the world's largest integrated energy and chemicals companies. It is wholly owned by the Government of the Kingdom of Saudi Arabia. The company's Upstream operations manage Saudi Arabia's vast hydrocarbon reserve base, which stood at 251.2 billion barrels of oil equivalent at the end of 2023. Aramco optimises production and maximises long-term value from these reserves. In addition, the company operates a strategically integrated global Downstream business, with headquarters in Dhahran, employing over 73,000 people worldwide.

Financial Performance

Aramco has demonstrated resilience and adaptability in its financial performance. In their Q3 2024 results, Aramco's President and CEO, Amin H. Nasser, highlighted their ability to meet customer needs and their intention to distribute the first performance-linked dividend in Q3. Aramco also completed a $3 billion international sukuk issuance in Q2 2024.

Growth Prospects

Aramco's vision is to become the world's preeminent integrated energy and chemicals company, providing reliable, affordable, and sustainable energy globally. They aim to maintain their leading position in oil and gas production while growing their portfolio profitably. Aramco is committed to playing a key role in the energy transition, deploying technologies that contribute to global emission reduction efforts. With their vast reserves, spare capacity, and operational flexibility, Aramco is well-positioned to respond to changing demands and support the global energy transition.

Choose a reliable brokerage account that suits your needs

When it comes to choosing a brokerage account to invest in the Aramco IPO from India, there are a few things to keep in mind. Firstly, you'll want to ensure that the brokerage platform is reputable and user-friendly, and that it suits your specific needs. Here are some key factors to consider:

Researching the Brokerage Platform:

• Reputation: Look for a well-established and trusted brokerage firm with a good track record. You can read reviews, check ratings, and seek recommendations from other investors.
• User-Friendliness: Opt for a platform with a user-friendly interface that is easy to navigate and understand, especially if you're new to investing.
• Saudi Aramco Stock Availability: Ensure that the brokerage platform offers access to Saudi Aramco stock. Not all platforms provide access to international exchanges, so confirm that Saudi Aramco is within their offerings.

Understanding Your Investment Needs:

• Investment Goals: Define your investment goals and risk tolerance. Are you looking for short-term gains or long-term growth? Do you prefer a more conservative or aggressive investment strategy? Knowing your risk profile will help you choose a brokerage account that aligns with your goals.
• Fees and Costs: Consider the fees and costs associated with the brokerage account. These may include account maintenance fees, transaction fees, and other charges. Look for a platform with transparent and competitive pricing.
• Trading Tools and Resources: Evaluate the trading tools and resources offered by the brokerage platform. This includes research and analysis tools, real-time market data, investment calculators, and educational resources to help you make informed investment decisions.
• Customer Support: Choose a brokerage account that provides reliable and responsive customer support. This is important, especially if you're new to investing, as you may need assistance with various aspects of your account or transactions.

Examples of Brokerage Platforms:

While the availability of brokerage platforms may vary depending on your location, here are some examples to consider:

• EToro: A highly-rated brokerage platform that offers commission-free stock trading, access to over 2,000 stocks from 17 exchanges, fractional shares, and a user-friendly interface. eToro is particularly popular for investing in Saudi Aramco stock.
• ICICI Direct: An Indian brokerage firm that has tie-ups with US-based foreign brokers, allowing access to US markets.
• HDFC Securities: Another Indian brokerage firm with similar tie-ups, providing access to US markets for domestic investors.

Remember, it's essential to do your research and compare different brokerage platforms before making a decision. Consider your investment goals, risk tolerance, and the specific features and offerings of each platform to make an informed choice that suits your needs.

Fund your brokerage account

To fund your brokerage account, you will need to deposit money into the account that you will use to buy Saudi Aramco stocks. The amount you deposit should be what you intend to invest in the IPO. The funding options typically include bank transfers, wire transfers, and online payment methods. The process of funding an account is usually straightforward, and you should follow the instructions provided by your chosen platform.

It is important to ensure that you have enough funds to cover the purchase and any potential fees. For example, while eToro offers 0% commission on buying stocks, other fees may apply. Therefore, it is essential to review the fee structure of your chosen brokerage platform.

Additionally, if you are an Indian investor, it is important to be mindful of the Liberalised Remittance Scheme (LRS) regulations set by the Reserve Bank of India. Under the LRS, domestic investors are allowed to remit up to $250,000 per financial year (April-March) for specific current account or capital account transactions, including investing in equity and debt securities listed abroad.

By funding your brokerage account, you will be one step closer to investing in the Saudi Aramco IPO. Remember to choose a reputable and user-friendly brokerage platform that suits your needs and offers the ability to invest in Saudi Aramco stocks.

Place an order using a market or limit order

Once you have chosen a brokerage platform and opened an account, you can place an order to buy Saudi Aramco stock. You can use a market order or a limit order.

A market order is executed immediately at the current market price. This ensures a swift trade but does not guarantee a specific price. If you opt for a market order, your trade will be executed at the best available price at the time of the transaction.

On the other hand, a limit order allows you to set a specific price at which you want to buy the stock. For example, if you place a limit order to buy Saudi Aramco stock at a price of SAR 35 per share, your order will only be executed if the stock reaches that price. This gives you more control over the price you pay but does not guarantee that your order will be filled.

It's important to consider your investment goals, risk tolerance, and market conditions when choosing between a market or limit order. Stock prices can fluctuate, so make well-informed decisions that align with your investment strategy and objectives.

Additionally, keep in mind that Saudi Aramco's stock price is subject to daily trading limits set by Tadawul, which are currently +/- 10% during the trading day, calculated based on the reference price (previous day's closing price).

Monitor your investment by staying informed and proactive

Once you have bought Saudi Aramco stock, it is important to monitor your investment by staying informed and proactive. Here are some ways to do that:

• Monitor company performance: Review financial reports and earnings regularly to gauge the company's stability and growth prospects. Saudi Aramco publishes its financial results upon the Board of Directors' approval of the financial statements. You can find the latest financial reports and presentations on the Aramco website.
• Track industry trends: Understand how energy market trends may impact Saudi Aramco's stock value. Consider factors like global oil prices, geopolitics, technology, and regulations. As a major player in the global energy sector, Saudi Aramco's performance can be influenced by various factors, including supply and demand dynamics and technological changes.
• Stay updated on news and events: Keep an eye on reputable financial news sources for announcements, mergers, acquisitions, or regulatory changes that can affect stock prices. For example, Saudi Aramco's decision to go public in 2019 was highly anticipated and impacted the company's stock value.
• Assess investment goals: Reevaluate your investment strategy periodically, focusing on long-term objectives and risk tolerance. Remember that stock prices can fluctuate, so make well-informed decisions aligned with your investment strategy and objectives.
• Utilize interactive share tools: Saudi Aramco provides interactive share tools on its website, allowing investors to keep track of current trading prices, view previous market performance, and calculate the current value of their investment.
• Explore other investment options: If you are unable to invest directly in Saudi Aramco's IPO, there are other ways to potentially gain exposure to the company's performance. For example, you can explore domestic mutual funds/ETFs or global mutual funds/ETFs that invest in emerging markets, Arab markets, or global large-cap stocks. However, note that the options for Indian investors are limited, and it may be difficult to find funds that align with your investment goals.

Frequently asked questions