Reliance Industries, Jio in talks to raise funds through foreign loans

Reliance Industries Ltd (RIL) and Reliance Jio are in discussions with lenders to raise up to $1.5 billion (about Rs 12,400 crore) and $2.5 billion (around Rs 20,600 crore), respectively, through foreign loans, reported The Economic Times.

To support its capital investment strategy, RIL is attempting to raise the necessary money through external commercial borrowing (ECB). According to those with knowledge of the situation, it is in discussions with a number of lenders, including Barclays, HSBC, and MUFG (Mitsubishi UFJ Financial Group) Bank. 

The loans, which are likely to have a five-year term, are anticipated to be priced 130-150 basis points higher than the Secured Overnight Financing Rate (SOFR), a benchmark rate used around the world that replaced the London Interbank Offered Rate (Libor). 

Because the Reserve Bank of India (RBI) has simplified the restrictions for ECB of up to $1.5 billion, the company doesn't need previous regulatory approval. Bank of America, Citigroup, Credit Agricole, DBS Bank and Mizuho Bank are among others that are in discussions with RIL.

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The overseas loan is likely to be priced after adding an estimated 65 basis points over the Secured Overnight Financing Rate (SOFR), a new global rate gauge, the people added. Going forward, Jio may even upsize the loans as more banks may join the syndication.

The tenor could be in the range of three to seven years.

According to multiple sources, Jio is in discussions with financial institutions such as Bank of America, BNP, HSBC, and Societe Generale (SocGen) to set up an offshore syndicated loan to pay for purchases of 5G network equipment from Sweden's Ericsson and Finland's Nokia.