RIL raises $1 bn to fund projects

MUMBAI: Reliance Industries, owner of the world’s largest refinery, raised $1 billion to fund projects, two people involved in the transaction said.

Reliance will pay 170 basis points over the London interbank offered rate for $500 million borrowed for five years, the people said, declining to be identified before a public announcement.

It will also pay 190 basis points over Libor for a similar-sized loan over seven years, the people said. The so called bullet loans have a fixed maturity. A basis point is 0.01 percentage point.

India’s biggest company by market value plans to invest $5 billion in a wireless internet venture. Reliance, which acquired shale gas assets from two companies in the US for $3 billion this year, is drilling for oil and gas off India’s east and west coasts.

“Oil and gas companies typically preserve cash for high-risk exploration and production activities and borrow for less risky ventures,” said Rohit Ahuja, an analyst at Centrum Broking.

“This loan could be to balance borrowing costs, since it is significantly cheaper than a rupee loan.” Rupee loans cannot be lent at interest rates below 7% after July 1, following an RBI directive asking Indian lenders to migrate to and announce a minimum lending rate, known as the base rate.