RCom to raise Rs 6,300 cr for expansion

Will use funds to finance operations of group firms; to have a total war chest of Rs 10,500 crore.

The Anil Ambani-controlled Reliance Communications (RCom) plans to scale up its wireless and enterprise business with an investment of over Rs 6,300 crore, under a plan internally branded as ‘Edge 2010’.

Initially, RCom will raise a short-term debt of Rs 3,500 crore by issuing commercial papers (CPs) and non-convertible debentures (NCDs).

Its subsidiary, MacroNet Mercantile Pvt Ltd, will raise Rs 1,500 crore to finance imports of telecom equipment, modems, handsets, data cards, DTH and IPTV set-top boxes. A large order for handsets and data cards is also likely for an aggressive push that the company plans to begin in January, when it will complete one year since its GSM rollout, sources say.

Reliance Communications Infrastructure (RCIL), which owns and operates internet infrastructure, plans to raise Rs 1,180 crore for building the country’s largest data centre in Hyderabad, with a space of 250,000 square feet. Overall, RCIL plans to have data centres with a total capacity of 400,000 square feet in the coming months.

Three more subsidiaries of RCom — Reliance Big TV Ltd, Reliance Webstore Ltd and Haryana Cybernet Pvt Ltd — will together raise Rs 130 crore, mostly for bank guarantees to procure equipment, according to banking sources close to the development.

“With the Rs 6,300 crore, along with Rs 4,400 crore cash and cash-equivalents, RCom would be ready with a Rs 10,500-crore war chest to get a significant edge in a competitive marketplace,” a company executive said on condition of anonymity.

Five months ago, the company had made the largest-ever prepayment of a long-term debt of a similar amount. After having made significant savings through the prepayment, the company is now looking at raising short-term capital for expansion under ‘Edge 2010’, according to the executive.

The source further said the company was betting on increased cash flows to cover the short-term debt in record time, while saving close to Rs 500 crore in financial charges on an annualised basis towards.

In the ‘Edge 2010’ plan, the company envisages to strengthen its GSM and CDMA network, DTH business and retail chain. Reliance World, the company’s retail arm, is upping its store count from the current 240 to 300, taking the company-owned outlet presence to over 155 cities.

With the mobile phone market getting highly competitive, RCom, which has three plans under the ‘Simply Reliance’ initiative, is also looking to cash in on the Mobile Number Portability (MNP) service, a facility that allows users to change their operator while retaining the number.

‘Edge 2010’ also allows for major initiatives under the enterprise business in the internet data centre and cloud computing space, for which the group recently forged a partnership with Microsoft.

Reliance BIG TV, on its part, aims at closing this year with three million subscribers, which will take its market share to 15 per cent.

The financial war chest of Rs 10,500 crore would also ensure adequate funds for the forthcoming 3G auctions and the marginal investment it would require to upgrade its 3G-ready GSM and CDMA networks, the executive said.