Mukesh Ambani's Reliance Port and Terminals to raise Rs 1,400 cr through bond Issue

MUMBAI: Reliance Port and Terminals, a part of Mukesh Ambani-led Reliance Industries, will raise Rs 1,400 crore through a private placement of bonds, market sources said.

The company will offer bonds with 10-year tenure at 10.40%. Yes Bank is the sole lead manager for the bond issue.

Bond market experts said that the offered rate is lucrative for investors, as it offers a credit spread of almost 190 basis points over the AAA-rated public-sector debt papers.

"The pricing is quite attractive with a good credit rating and the company has steady cash flows, subscription of the issue should not be a problem. The yields at 10.40% are very attractive for an AAA-rated paper," said Ajay Manglunia, head, fixed income, Edelweiss Capital.

The AAA-rated PSU debt papers for 10-year maturity are trading in a range of 9-9.55%. The 10-year benchmark government security paper closed at 8.35% on Tuesday. Thus the credit spread or the interest differential of the Reliance Port and Terminals bond over the government security yield is almost 205 basis points. One basis point is equivalent to 0.01%

The bond has been rated "AAA" by two rating agencies - Crisil and Care. The higher coupon rate can be explained by the fact that the company is not listed, though it has steady cash flow as it has the tender for the storage and transportation of crude oil at Jamnagar port for Reliance refineries.

Reliance Port and Terminals merged nine group companies with itself with effect from 2008 to consolidate the group's logistics, engineering and construction-related services businesses. Of the merged companies, four companies provide logistics, pipeline and engineering-related services to the parent company Reliance Industries ( RIL), while the others are investment-holding companies.

"The merger has reduced the proportion of revenues RPTL derives from RIL under the throughput agreement with RIL, nevertheless, profitability and cash flows from these throughput agreements continue to form a significant proportion of the merged entity's profitability and cash flows," Crisil Ratings said in a statement.

"Investments in and loans and advances to, the group companies form a significant proportion of the capital employed of the company. However, overall debt levels have not increased significantly on account of the merger," the rating agency said.