Reliance Inds to raise $150 m via bond float

Reliance Industries Ltd (RIL) proposes to raise $150 million (about Rs 660 crore) though an overseas bond issue to fund the capital expenditure of its refining and petrochemicals businesses.

The bonds would represent an unsecured pari passu obligation of RIL. The bonds have been rated BBB by Standard & Poor's. RIL, the country's largest private sector company, plans to spend Rs 61,700 crore on capital expenditure over three to four years.

In its rating report, S&P said it views RIL's capex plan with some concern, given the potential softening in the petrochemical cycle, reduced demand for refined products, and uncertainties related to the company's upstream gas business.

Lower-than-expected cash flows for funding a part of the capex could mean still higher borrowings, which would weaken RIL's credit protection measures.

Nevertheless, the company's current financial position, strong liquidity, and access to financial resources mitigate some of these risks, the rating agency noted.

S&P credit analyst, Anshukant Taneja, said, "The rating reflects its globally competitive position in refining and petrochemicals, its divestment of capital-intensive non-core telecom and power businesses, and its overall moderate financial profile."

"The rating, however, remains constrained by Reliance's exposure to highly cyclical industries, large capital commitments in its refining, exploration, and production businesses, and uncertainties in developing its reportedly large gas reserves," he said.

The outlook on the rating is stable. A strengthening of credit protection measures, timely completion of projects and continued stability in its business risk profile, can result in an improvement in the outlook.

However, a sharp downturn in commodity cycles, decline in cash flow protection measures due to increased dependence on external debt for capital expenditure or acquisitions or increased exposure to non-core capital-intensive projects would weigh on ratings, Taneja said.