Eyeing spike in interest rates, RIL raises funds at multi-levels

With indications that upcoming interest rates in markets are going to face a surge both domestically and internationally, Reliance Industries (RIL) is securing funds at multiple levels. Under the leadership of its owner Mukesh Ambani, RIL has obtained approval from the board to raise $5 billion in unsecured dollar bonds at multiple levels to help in re-financing existing borrowing.

RIL’s telecom branch, Reliance Jio Infocom is also in plans to tackle the expensive debt with a bond sale of Rs 5000 crore. India is starting to witness interest rates on trading as RBI (Reserve Bank of India) is draining surplus liquidity from markets.

As per the Indian conglomerate’s stock exchange filing, the Finance Committee of the company board, on Saturday during its meeting approved a “proposal for issuance of senior unsecured US Dollar-denominated fixed-rate notes from time to time, for an aggregate amount up to USD 5 billion, in one or more tranches”. It added, “The proceeds from the issuance of the Notes will be utilized primarily for refinancing of existing borrowings, in accordance with the applicable law.” The bond sale will thus become such single largest borrowing by an Indian conglomerate.

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RIL has not yet divulged any details about the timing or the pricing of the bonds, it is probable that the 10-year debt might be offered at approximately 110 to 130 basis points over the US Treasury benchmark, and the 30-year debt may be at 130 to 140 basis points approximately over comparable maturity Treasuries. On Friday, RIL arm Reliance New Energy Solar Ltd (RNESL) finalized a deal to purchase UK-based battery tech firm Faradion for an enterprise value of GBP 100 million.

Moody’s, on Tuesday, assigned Baa2 rating to the proposed $5 billion fund raise by RIL. The Mukesh Ambani’s conglomerate is raising funds from global investors through advantageous Section 144A of US Securities Act. Under this section an exemption is offered on sales and offers of large “qualified institutional buyers” in the US. Adjusted net debt or operating profit of RIL was estimated about 1.1x as on September 30, 2021.