Reliance Infra plans to raise 300 crore through bonds

MUMBAI: Anil Ambani-promoted Reliance Infrastructure plans to raise Rs300crore through two tranches of bonds of five and seven years’ maturity, persons aware of the matter told ET. The company will offer its fiveyear bonds at 9.8% and sevenyear bonds at 10%, bond dealers said.

Mumbai-based Reliance Infra refused comment, but analysts said the company might use the funds primarily for refinancing part of its debt. The infrastructure and power utility company’s standalone debt at the end of 2012-13 was Rs11,500 crore and its consolidated debt was Rs22,600 crore.

The Reserve Bank has cut key policy rates by 125 basis points since April last year. The impact of the rate cuts can now be seen on the yields on government and corporate bonds. The benchmark 10-year government paper is currently trading at 7.11%, almost 120 basis points lower than the yields in December 2012. One basis point is one hundredth of a percentage.

A bond dealer at a Mumbaibased brokerage said, “RInfra enjoys a good rating, but they may have to pay a premium over other similar-rated bonds because the sector is under-performing and also there are some concerns about slowdown in their projects.”

Infrastructure developers in the country frequently walk a tightrope between rising cost of finance and problems related to land acquisition and a tardy government approval system. Reliance Infra stares at termination of mega projects worth Rs20,000 crore due to delays by government agencies in fulfilling commitments related to these projects. If the company’s five-year bond is priced at 9.8%, it will be almost 150 basis points higher than the yield of similar rated bonds of the same tenure — Hindalco’s bonds are trading at 8.3% while those of Tata Motors are trading at 8.85%.

Yields on best-rated corporate bonds have also rallied by over 100 basis points. The yields here are linked to yields on government bonds.