Reliance Industries, the most profitable company as also the largest borrower, has hit the overseas debt market with a $800-million bond sale programne as it seeks to pare a portion of its high cost debt that stands at over Rs 2.14 lakh crore.
"Reliance has hit the overseas debt market with a $800 million issue," investment banker told PTI, requesting not to be quoted as the issue is yet to be priced and closed.
Meanwhile, rating agency Moody's today signed a Baa2 rating to the proposed unsecured bond sale by RIL. The bonds will rank pari passu with RIL's other existing and future unsecured and unsubordinated obligations, it said assigning the Baar rating.
It can be noted that for the September quarter, RIL, which has a market capitalisation of close to Rs 6 lakh crore, had a cash pile of Rs 77,014 crore and a debt of Rs 2,14,145 crore, up from Rs 1,96,601 crore in the previous quarter.
The Mukesh Ambani-led RIL has been borrowing heavily for expansion and entry into telecom space with Reliance Jio into which it has invested over Rs 1.4 lakh crore. That apart it has also pumped in over Rs 1 trillion into its core refining and petrochemicals expansion which is now completed.
"The Baa2 rating reflects RIL's ability to generate operating cash flows, with annual Ebitda of over USD 10 billion from its large-scale integrated refining and petrochemical operations that generate strong margins, and its nascent but growing digital services business," said Vikas Halan, a vice-president and senior credit officer at Moody's.
The rating also incorporates the increase in RIL's business risk because of its growing digital services business and our expectation that high cash outflow for capital spending will keep its free cash flow negative over at least next 18 months", added Halan, who is also Moody's lead analyst for RIL.
Early November, Moody's had lowered RIL's credit rating outlook to stable while affirmed its overall ratings, citing likely negative free cash flow due to heavy debt repayments over the next 18 months.
Moody's had said RIL would see large cash outflow over the next 18 months towards paying back its creditors for the billions of dollars of capex it had incurred on telecom and refining and petchem expansions. This would lead RIL to tap the debt market more as a result of which it would not be able to reduce its debt and also its free cash flow to be in the negative territory for next 18 months or so, Moody's had said.
"Such payments along with additional capex towards telecom will constrain any reduction in net borrowings until fiscal 2019," Moody's had warned.
"Accordingly, we've revised our outlook on RIL's long-term issuer rating to stable from positive, but the outlook on its foreign currency senior unsecured rating is maintained at stable," Moody's had said.
Moody's expects Jio, which reported a Rs 260 crore operational profit in Q2 with a Rs 271 crore net loss, to turn in first set of profits in the current fiscal itself.
The oil-to-telecom conglomerate reported a 12.5 per cent jump in Q2 net after refining margin soared to a nine-year high and telecom venture earned operational profit.
It earned a net income of Rs 8,109 crore, or Rs 13.7 per share as it could earn USD 12 on turning every barrel of crude oil into fuel, up from USD 10.1 a barrel gross refining margin in same quarter of previous year and USD 11.9 a barrel in first quarter of the current fiscal. Total revenue was up 23.9 per cent to Rs 1,01,169 crore.
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