RIL bonds advance after Mukesh Ambani hastens debt-reduction plan

The conglomerate's 3.667% bonds due 2027 rose 0.4 cents on the dollar to 100.28 as of 9:10 am IST, the highest level since March 13

Reliance Industries (RIL) bonds gained to reach an almost  two-month high, after the firm announced that the group’s net debt would be slashed to zero, ahead of a previously drawn schedule and talks to sell a stake in its energy unit to Aramco are on course.

The conglomerate’s 3.667 per cent bonds due 2027 rose 0.4 cents on the dollar to 100.28 as of 9:10 am IST, the highest level since March 13, according to prices compiled by Bloomberg. The group’s 4.125 per cent notes due 2025 jumped to the highest level since March 17 to 102.85 cents.

Last week, the company’s board signed off on a proposal to raise about 531 billion rupees ($7.1 billion) selling shares to existing investors. The decision came days after Facebook announced buying a 10 per cent stake for $5.7 billion in Jio Platforms, Reliance’s digital asset. On Monday, the Indian company said private-equity firm Silver Lake Partners will invest about $753 million in the unit.

With a string of fund-raising plans, Chairman Mukesh Ambani, 63, is seeking to build investor confidence at a time when the coronavirus pandemic sparked a crash in oil prices, causing profit at its energy-and-petrochemicals division to drop the most in nearly two decades last quarter. 

 

 

The collapse in oil prices has also added uncertainty to a deal under which Reliance was negotiating to sell an estimated $15 billion stake in its oil-and-chemicals division to Saudi Arabian Oil Co.

The Aramco talks are on course, Reliance said in its April 30 statement. The company also said it has sought regulatory approvals to carve out the oil and chemicals division. Investors have sought clues to the progress of negotiations with Aramco, as the Saudi company is known, helping drag the stock to a two-year low in March. The shares have rebounded, gaining about 66 per cent since the March 23 close, on renewed confidence in Ambani’s ability to attract investors.

Existing shareholders will get one rights share for every 15 held, at 1,257 rupees each, or 14 per cent lower than the closing price on April 30. Ambani and other members of the founding family who own stakes will subscribe to their entire entitlement and will also buy any stock left over, under the plan.

Shares of RIL fell 1.3 per cent at 9:48 am in Mumbai on Monday, in line with global markets that have been weighed down by the impact of the pandemic. The stock rallied almost 32 per cent in April, the biggest monthly jump since January 2006.

The tycoon, Asia’s richest person with a net worth of $53 billion, is moving the company away from its energy-related businesses to faster-growing consumer segments including its digital platform and retail.

Reliance said April 30 that it has received interest from new potential global partners in taking a stake similar to the purchase by Facebook in Jio Platforms.

Reliance “has received strong interest from other strategic and financial investors and is in good shape to announce a similar sized investment in the coming months,” it said in a statement. The company “is set to achieve net zero debt status ahead of its own aggressive timeline.”

Moody’s: Rights issue credit positive for RIL
 

Moody's Investors Service on Monday said Reliance Industries' (RILs’) Rs 53,100-crore rights issue, announced last week, is credit positive as earnings will decline because of the economic shutdown. Also, the company announced an investment of Rs 5,656 crore by Silver Late in Jio Platforms. “The proceeds from the rights issue will reduce RIL's net debt by about $7.8 billion and is credit positive,” Moody's said in a note. PTI