RIL group raises over Rs 5,100 crore via bonds and CPs

Mumbai: Mukesh Ambani-led Reliance Industries Ltd (RIL) raised Rs 2,795 crore in a domestic bond sale Friday, taking advantage of a market flush with liquidity to reduce borrowing costs, dealers said. This follows Rs 8,500 crore it raised via the same route on April 17. Also on Friday, the RIL group collectively raised Rs 2,325 crore via short-term commercial paper (CP) and other money market instruments, dealers said.

The five-year bonds sold Friday offered 7.4 per cent, which is about 150 basis points higher than similar maturity government papers. Bond traders find it reasonable cheap rate, reflecting the cut in borrowing costs due to emergency action by the Reserve Bank of India on March 27 to cope with the effects of the Covid-19 pandemic. Had RIL raised the money before March 27, the company would have had to offer at least 100-120 basis points more, dealers said. A basis point is 0.01 percentage point.



Axis Bank, Yes Bank, ICICI Bank and SBI Caps are said to have bought the bonds on Friday, three market sources told ET. Some investors may sell the debt in the secondary market, they said, adding that Axis Bank could have been the largest investor in the bond sale. RIL did not reply to ET’s queries. Individual investors could not be contacted immediately for comment.

The proceeds will be used either to refinance debt at India’s most valuable conglomerate or support normal business activities.

The RBI said March 27 it would lend as much as Rs 1 lakh crore under Targeted Long Term Repo Operations (TLTRO) to lower yields in the secondary market and invest in primary issues to help spark credit growth and revive the economy. But banks have been parking more than Rs 7 lakh crore daily with the RBI’s reverse repo window that now earns a quarter percentage point lower after it was cut to 3.75 per cent, reflecting lenders’ risk aversion and their preference for safe havens.

Regarding the Rs 2,325 crore borrowed on Friday, short-term money is normally used for working capital. Companies like RIL may have higher working capital needs with the country under lockdown. Of the Rs 2,325 crore, RIL mopped up Rs 550 crore offering 5.98% at about 11-month maturity. Reliance Jio Infocomm sold CPs worth Rs 1,775 crore paying 5.88-6% at a three-month maturity.

Facebook will invest Rs 43,574 crore in Jio Platforms for a 9.99 per cent stake, the two companies had said on April 22. Jio Platforms is the parent of Reliance Jio Infocomm.

Ambani, India’s richest man, had promised shareholders in August 2019 that RIL would be a “zero net-debt company” in 18 months. The last series of bonds--nonconvertible debentures—are part of a broader strategy to either stretch leverage maturity or reduce net debt. RIL had outstanding debt of Rs 3.07 lakh crore at the end of December 2019.

“Banks are now seeking safe investment bets as they have turned risk averse amid the economic crisis,” said a senior executive involved in the company’s fund raising plans.

Earlier this month, brokerage Morgan Stanley said that RIL’s net debt will fall even if energy and retail demand struggles for six months. The brokerage said that net debt might not decline if asset sales are pushed out, but it still might not rise in FY21. Goldman Sachs said that concerns over the balance sheet and free cash flow were overdone.