RIL to raise Rs 2,500 crore via bonds issue to repay loans, fund capex

Reliance Industries Limited (RIL) plans to launch its Rs 2,500-crore bonds issue in the next few days to repay its old loans and fund capital expenditure (capex.  

The company has also initiated talks with banks to raise funds both in India and abroad for its $10 billion oil refinery planned in Gujarat. 

“More fundraising will follow in the coming weeks both in India and from the overseas markets,” said a source close to the development.

While talks for funding the new refinery are preliminary in nature, lenders said RIL had already raised close to Rs 21,500 crore through rupee bonds in fiscal year 2019 as compared to Rs 25,165 crore raised in fiscal year 2018 (see chart). This makes it one of the largest mop ups by an Indian company. 

The size of the dollar bonds has not been decided as yet though Saudi Arabia’s Aramco is in talks with the company to buy a stake in the new refinery, said the source.

At present, RIL has bank facilities of Rs 60,000 crore and of this, half are non-fund-based. When contacted, a company spokesperson declined to comment citing the silent period due to results on Thursday.

Analysts said the company has debt repayment obligations worth about Rs 37,400 crore in FY19 and Rs 15,000 crore in FY20. 

Even though its effective consolidated net debt is high relative to the cash flow, investors appear to be relatively unconcerned due to expectations that cash flows from refining and petchem will remain strong given the expectations of a sharp increase in gross refining margins,” said a analyst.

The company is approaching the end of its large capex plan in its petrochemical and refining segment while capital expenditure in its telecom segment is expected to continue in the next financial year, say analysts.

“In the last five years, heavy investments in the consumer business have helped RIL transform from an oil and gas conglomerate to India’s “everything company.” 

With better-than-expected traction at Jio, RIL appears to have crossed the tipping point in terms on consumer acceptability on the B2C front,” said an analyst with BOFA. 

“We feel the momentum at the telco and retail businesses will continue, led by continued investments,” the report said.

Reliance is currently in the middle of acquiring the telecom assets of Anil Ambani’s Reliance Com­munications for Rs 18,000 crore but the acquisition has been delayed on dispute over who will pay the government dues for spectrum.

On Wednesday, RIL’s shares closed at Rs 1,134 with a market value of Rs 7.18 trillion.