Reliance seeks $2.7 billion in forex loans to refinance debt
Reliance Industries will raise the $2.7 billion loan in multiple tranches and will be used to refinance some of its existing high-cost debt
Mumbai: Reliance Industries Ltd, among the biggest forex loan borrowers in India, is set to tap the foreign debt market to raise $2.7 billion to refinance its existing high-cost debt. RIL spent around ₹ 22,000 crore as capital expenditure on Reliance Jio Infocomm Ltd in the June quarter, and reported a net income of ₹ 9,459 crore in the same period. In Q1 FY19, RIL had an outstanding debt of ₹ 242,116 crore, up from ₹ 218,763 crore in the previous three months. Cash in hand marginally rose to ₹ 79,492 crore in the June quarter.
“We are planning to raise $ 2.7 billion in forex debt through the course of fiscal 2019. The money will be raised in multiple tranches and will be used to refinance some of our existing high cost forex debt,” a senior company official said, refusing to reveal more information.
More than half of RIL’s $ 34 billion debt is due for repayment by 2022, while around $ 13 billion is maturing from 2018 through 2020. Most of the outstanding debt is denominated in foreign currencies.
Reliance has sought shareholders approval to issue redeemable non-convertible debentures (NCDs) at its 5 July annual general meeting, it said in its annual report. Due to the high rating at BBB+ (by S&P Global Ratings), which is two notches higher than the sovereign rating, Reliance can raise cheaper funds. Moodys has a Baa2 rating on the company, a notch above the governments rating.
RIL is the only private sector company in India that has issued perpetual bonds to foreign investors a few years back. The only other domestic entity to tap the perpetual bond market is the state-run State Bank of India.
According to investment bankers, Reliance’s debt repayments from 2018 through 2020 will be its biggest for any three-year period in the past and include about $ 8.14 billion term loans, $ 3.52 billion bonds and a $ 300 million revolving loan. It also has about $ 1.65 billion in interest payments.
In the June 2018 quarter, Reliance’s finance cost jumped more than threefold to ₹ 3,555 crore on an annualised basis. Its debt has trebled over the past five years as it invested $ 37 billion in Reliance Jio and expansion of its petrochemical business that included setting up a pet coke gasification unit.
During the recent RIL AGM, Ambani said his vision for the group was to become a consumer company over the next decade. Already, 31% of Reliance’s revenue is coming from retail and telecom business, June quarter numbers show.
Reliance Jio, which was launched two years ago, reported a net income of ₹ 612 crore in the June quarter, while market leader Bharti Airtel Ltd’s plunged to ₹ 97.3 crore from ₹ 367.3 crore a year earlier.
Reliance Industries’s record net income in the June quarter was led by bumper earnings from retail business, improved profitability of Reliance Jio and near-doubling of earnings from petrochemical business offset lower margins from oil refining business.
Consolidated net profit of ₹ 9,459 crore was 17.9% higher than ₹ 8,021 crore that the oil-to-telecom conglomerate had netted and exclude a ₹ 1,087 crore exceptional income from the sale of a stake in Gulf Africa Petroleum Corp.
Revenue rose 56.5% at ₹ 141,699 crore, thanks to the spike in oil prices.
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