RCom to raise $1 billion overseas debt

Reliance Communications (RCom) is in advance stages of negotiations with global banking majors to raise $1 billion (about Rs 4,000 crore) overseas debt that will be used to partly finance its capital expenditure in the current financial year.

The company is in talks with several banks including ABN Amro Holding, Barclays, Calyon, HSBC Holdings, BNP Paribas, Mizuho Corporate Bank and Standard Chartered for the loan.

According to a source close to the development, the negotiations are in advanced stages with RCom seeking "competitive rates linked to Libor rates". The company, which is looking to raise the money over six years, is likely to close the deal in two-three weeks.

This would be beneficial to the company, compared with the current market prices as RCom might be expecting a fall in Libor over time.

Rcom's present debt-to-equity ratio stands 0.08:1, and the debt is not expected to have any impact on the company's balance sheet, they added.

A company's spokesperson declined to comment on the development. Earlier, announcing RCom's full-year results, Chairman Anil Ambani said that the company's debt-to -equity ratio in 2006-07 had been reduced to 0.07:1.

This means the company can borrow up to $5 billion (Rs 20,000 crore at the time of announcement).

The company is intending to raise the debt "to partly finance its earlier announced $2.5 billion (around Rs 11,000 crore) capex" for the current financial year, while the remaining would be financed through internal accruals. RCom's capital expenditure in FY07 was around Rs 7,700 crore.

RCom was planning to increase its total number of cell sites to 25,000 from the present 6,000 during this financial year, and expand to 4 lakh villages from the current 2 lakh.

It was also planning to launch IPTV, DTH and WiMax services in the country, and increase its enterprise business services in the current financial year.

The company plans to launch IPTV and DTH services by the third quarter of the current financial year. The capex also to be used for increasing its GSM connectivity to cover all circles from the present eight circles.