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Reliance goes abroad to raise money

Mumbai, Jan. 28: Reliance Industries, which is sitting on over Rs 75,000 crore in surplus cash, today launched an issue of bonds in Hong Kong and Singapore to raise a minimum $500 million (around Rs 2,700 crore), company sources said.

This is the fifth time that the Mukesh Ambani-led company is raising long-term debt this fiscal. So far, it has raised $4 billion from overseas markets.

“The company is planning to raise at least $500 million by issuing perpetual bonds. The issue hit the markets today and the final amount will depend on the investor appetite. The initial pricing is 6 per cent over the US treasury,” an RIL official who did not wish to be named said.

Perpetual bonds have no maturity dates. Therefore, it may be treated as equity and not debt. Perpetual bonds pay coupons forever and the issuer does not have to redeem them. Cash flows are, therefore, those of perpetuity.

However, the official said the final pricing would be much below the guidance because of the strong fundamentals of the company.

When asked why it is raising debt despite sitting on over Rs 75,000 crore surplus cash, the official said the interest rates were at historical lows and hence it was a good time for Reliance to raise long-term money. He said the long-term nature of the bond was in line with the long-term assets of the company.

He further said the Bank of America, Citi, HSBC, Barclays Deutsche Bank, JP Morgan and RBS were mandated for the issue.

The funds will be used to meet the capex requirements of the company that runs the world’s largest refinery at Jamnagar.

Axis Bank shares

In the biggest equity deal for the year, private sector lender Axis Bank is selling shares to raise about $1 billion, two sources with direct knowledge of the matter said.

The bank is selling up to 34 million shares to institutional investors at Rs 1,390 a share to raise as much as $877 million, said the sources, who declined to be named.

Separately, Axis is also raising up to $152 million by allotting up to 5.9 million shares on a preferential basis at Rs 1,390 a share, said the sources, adding that the bank will raise a total of about $1 billion from the two tranches.

 
 
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