RIL raises $1.4 bn in overseas debt to prepay Reliance Holding's loans

14 banks signed up for a deal last week that will give RIL the distinction of raising the highest debt from international lenders by an Indian firm

India’s largest corporate, Reliance Industries (RIL), has raised $1.4 billion to pre-pay its existing foreign loans and about 14 international banks signed up for the transaction last week. RIL will use the proceeds to repay loans of its subsidiary Reliance Holding USA.

With this, RIL is ending the year with the highest debt fundraising from international banks among Indian companies. A banker close to the development said some of the largest banks — including State Bank of India, Citibank, Barclays and DBS Bank —participated in the fundraise by with the instrument priced at 95 bps (basis points) above Libor.

A RIL spokesperson declined to comment.

According to data, RIL has raised $3.7 billion so far this calendar year from debt markets, mainly to repay its older loans. The company had raised a record $6.1 billion in 2017 from overseas debt markets.

RIL has also raised an unprecedented $25 billion by selling stake in its telecom and retail arms with some of the world’s biggest private equity companies and tech giants like Facebook and Google investing in the company.

“Apart from raising funds for its telecom and retail ventures, RIL joint venture with Sibur of Russia also tapped the debt market to start production of synthetic rubber in India,” the banker said.  

The largest ever capital raise in India through rights issue and asset monetisation was entirely used to retire debt and its other liabilities.

As of September 30, funds inflow of Rs 1,46,723 crore was used the repay loans and the full benefit of lower interest cost will reflect in subsequent quarters, the company said in its September quarter results.

“As RIL’s credit rating is the best among Indian firms, banks are opening up their purse for the company,” the banker added.

Fundraising has emerged as a favourite instrument for Indian firms due to its low cost and easy availability for better-rated companies. For companies like RIL, which have sizeable earnings in foreign exchange, volatility in foreign markets is not a big concern as their foreign exchange earnings come as a natural hedge against any sharp rise in dollar’s value.

Bankers said as a result of the significant fundraising completed till date, RIL has effectively become net debt free according to the debt levels of March 31. 

In FY20, RIL announced signing of a non-binding agreement with Saudi Arabian Oil Company for sale of a 20 per cent stake in its oil-to-chemicals (O2C) business, including refining business, petrochemicals business, and RIL’s 51 per cent stake in the petroleum retail JV with BP. 

The deal values RIL’s O2C division at an enterprise value of $75 billion, which translates to an investment of $15 billion from Saudi Aramco.

Bankers said though the deal is pending due to regulatory issues, its conclusion will further deleverage RIL’s balance sheet.