Mukesh Ambani eyes $2.5 billion from overseas to fund his telecom, retail aggression

MUMBAI: Mukesh Ambani-controlled Reliance Industries is in talks with banks to raise up to $2.5 billion in loans from overseas market as it steps up pace of investments in telecom and retail businesses, four people familiar with the matter said.
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RILNSE 0.50 % is negotiating with more than a dozen banks to arrange the loan in single or multiple tranches as it rolls out fibre network and sets up more retail stores, said those people who did not want to be identified. This loan is to refinance existing offshore debt raised about two and a half years ago and would reduce average borrowing cost or extent maturities, said one of the persons cited above.

The loans are expected to be priced between 100 and 125 basis points above Libor (London Interbank Offered Rate) with a likely tenor of 3-5 years.
Road Shows to Start Soon
This is the pricing that investors are demanding at this point though nothing has been finalised yet, they said. Road shows are expected to start within a few weeks, said another person mentioned above. “As a part of its ongoing liability management programme, RIL continues to look at opportunities to refinance debt at very competitive rates of financing,” a RIL spokesperson said in response to ET’s queries.

Reliance, one of the best rated firms in India, could successfully raise debt and refinance with cheaper facilities in the past. The new fundraising comes after chairman Ambani told shareholders that it would further expand its telecommunication business.

“While India has pole-vaulted into global leadership in the mobile broadband space… we still lag behind significantly in fixed-line broadband,” said Mukesh Ambani, at the recent shareholders meet. “Optical fiber based fixed-line broadband is the future. Jio is determined to move India to among the top 5 in fixed-line broadband, too.”

The petroleum-to-retail-stores conglomerate has invested more than Rs 2.5 lakh crore in telecom industry in the past few years attempting to capture a major share of the rising digital consumption – from data to multimedia and streaming of movies and entertainment content on various platforms. It is also aggressively expanding its retail venture.

For the full fiscal year, the company may raise about Rs 40,000 crore, or $5.8 billion, in new loans, reported Bloomberg. As the company expands its network, its loans have also been steadily climbing. Its total debt has tripled in the past five years as it borrowed to fuel more than Rs 3.3 lakh crore supporting its capex. The company has total borrowings of about Rs 2.2 lakh crore which is due by 2022, Bloomberg data shows.

Reliance’s better-than-sovereign rating has helped it raise cheaper debt while investing cash reserves that reached Rs 78,000 crore last financial year. Other income accounted for about a fifth of its profit before tax in the 12 months to March 31 — much of it earned by investing the cash.

RIL holds a BBB+ credit rating from S&P Global Ratings, higher than India’s sovereign rating. Reliance returned to the local-currency bond market after a more-than-seven-year absence last year, raising Rs 20,000 crore via six offerings between August and November. The conglomerate priced some notes maturing in three years or slightly more in the range of 6.78-7.07%.
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