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Reliance to raise USD 2.7 billion in fresh forex loans
The cash-rich Reliance Industries, which also is one of the biggest forex loan borrowers in the country, is set to tap the foreign debt market to raise $ 2.7 billion to refinance its existing high cost debt.
By
migrator
migrator
Mumbai
As of the June 2018 quarter, the Mukesh Ambani-led company had an outstanding debt of Rs 2,42,116 crore, which rose from Rs 2,18,763 crore from March 2018, while cash in hand marginally rose to Rs 79,492 crore. The company had spent around Rs 22,000 crore in capex during the quarter mostly into the still cash-burning telecom venture and reported a net income of Rs 9,459 crore. Its outstanding debt has been rising as its fledgling telecom business continues to drain cash. “We are planning to raise $ 2.7 billion in forex debt through the course of the 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 company’s around $ 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 at its July 5 AGM, 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.
Reliance is the only private sector company in the country 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 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 revolver loan. It also has about $ 1.65 billion in interest payments.
In the June 2018 quarter its finance cost jumped more than threefold to Rs 3555 crore on an annualised basis. The retail-to-refining giant debt has trebled over the past five years as it invested a whopping $ 37 billion in a telecom venture and to bolster its traditional petrochemicals business which included a pet coke gasification unit and in expanding petrochemicals capacities. Telecom is still cash burning having sucked in around Rs 22,000 crore in the June quarter.
During the recent AGM, billionaire owner Ambani, the richest Asian, said his vision for the group was to become a consumer company over the next decade. As our golden decade rolls on, the consumer business will contribute as much as hydrocarbon,” Ambani had said, adding consumer businesses accounted for 13 per cent of Rs 59,961 crore pre-tax profit of the conglomerate as March 2018.
Consumer biz to be like hydrocarbon biz
With Reliance Industries netting as much as 26 per cent of its Rs 1,41,699 crore revenue and 21 per cent of its pre-tax profit from the retail and telecom verticals in the June quarter, Chairman Mukesh Ambani’s plan to convert the oil-to-telecom conglomerate into a consumer company over the next decade may be closer than the target. During the June quarter, as much as Rs 36,581 crore of its consolidate income of Rs 1,41,699 crore came in from its retail, telecom and media businesses. It helped RIL also report a record net income Rs 9,459 crore which rose 17.9 per cent over the previous year. Thanks to a massive spurt in oil prices, its revenue jumped 56.5 per cent to Rs 1,41,699 crore. Of this Reliance Retail more than doubled its revenue at Rs 25,890 crore, while Jio reported 13.8 per cent rise in revenue at Rs 9,567 crore, and the media business reported a revenue of Rs 1,124 crore. “As much as 21 per cent of our pre-tax revenue came in from the consumer/ retail business including oil marketing, said group deputy financial officer V Srikanth. The diesel and petrol retailing business is billed under Reliance Retail and chipped in 12 per cent of the pre-tax profit, he added.
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