Reliance Industries Ltd. secured board approval to raise as much as 200 billion rupees ($2.5 billion) as billionaire Mukesh Ambani’s conglomerate prepares to repay looming maturities and fund new projects.
(Bloomberg) — Reliance Industries Ltd. secured board approval to raise as much as 200 billion rupees ($2.5 billion) as billionaire Mukesh Ambani’s conglomerate prepares to repay looming maturities and fund new projects.
Undeterred by monetary tightening globally, India’s largest company by market value plans to raise the funds through private placement of bonds in one or more tranches, according to an exchange filing Friday. Earlier in the day, it posted a quarterly profit that beat analyst estimates.
Reliance, which did not specify the use of the proceeds raised through this bond sale, is embarking on a capital expenditure program that includes $75 billion for green energy and $25 billion for 5G rollout in India. It also has nearly 250 billion rupees in bonds due for repayment over the next 1.5 years, according to Bloomberg data.
The fund raising plans come at a time when Ambani’s retail-to-refining empire is facing twin headwinds of rising interest rates and surging debt on its own books.
Reliance had debt of 3.04 trillion as of Dec. 31 — an increase of 24% compared to the year-ago period — while cash and equivalents fell 20% to 1.93 trillion rupees, according to the earnings exchange filing Friday. That leaves it with net debt of 1.1 trillion rupees, reflecting a sharp turn in strategy from the much-touted zero-net-debt status it achieved in 2020.
Finance cost jumped 36% for the latest quarter “primarily due to interest rate hike by central banks and higher loan balances,” Reliance’s Joint Chief Financial Officer V. Srikanth told reporters in a post-earnings call Friday.
The conglomerate, however, has multiple growth engines — Reliance Retail Ltd. and Reliance Jio Infocomm Ltd. continue to deliver solid performance — that can help fend off concerns around its leverage.
“Reliance has just beaten analyst expectations,” said Utkarsh Sinha, managing director of Bexley Advisors, a boutique investment bank firm. “It has the potential to absorb more debt in its balance sheet without affecting either its rating or its equity performance.”
Stellar Reputation
Reliance also has a stellar reputation in the debt market. Its local-currency bonds carry a safest AAA rating while its foreign-currency debt is rated Baa2 by Moody’s Investors Service — one notch higher than the sovereign — enabling it to borrow at very competitive rates.
Reliance is in the process of building four giga-factories to make solar modules, hydrogen electrolyzers, fuel cells and storage batteries, as it diversifies beyond its fossil fuel roots. It also has ambitious plans to make India a hydrogen hub.
“Reliance continues to enjoy AAA credit rating,” Sinha said. “It is in a position to command a discount on prevailing rates from international borrowers, which could be a steal compared to current Indian interest rates.”.
–With assistance from Divya Patil and Saket Sundria.
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