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With an eye on $33 bn debt pile, RIL making room to add $3 bn to borrowings

The retail-to-refining conglomerate's debt has tripled over five years


Mukesh Ambani

Ltd. is making room to add as much as Rs 200 billion ($3 billion) to borrowings, using its cash buffer to manage rising funding costs and $13 billion of maturities over the next three years.

The billionaire Mukesh Ambani-led company will seek approval to issue redeemable non-convertible debentures at its July 5 shareholder meeting in Mumbai, it said in its latest annual report, without specifying how the money will be used. Reliance has total debt of about $33 billion, more than half of which is due for repayment by 2022, according to data compiled by Bloomberg.

The retail-to-refining conglomerate’s debt has tripled over five years as it invested $37 billion in a telecom venture and to bolster its traditional petrochemicals business. Its latest plan extends a strategy of raising cheaper debt, riding on its better-than-sovereign ratings, while also actively investing about $12 billion in reserves to generate returns.

The cash “helps them manage their debt-raising at the most optimal interest rates,” Vishal Kulkarni, a Singapore-based analyst at Ratings, wrote in an email. “Historically the company has been able to keep their cash invested in financial assets that provided returns more than their costs of funding -- thereby avoiding any negative costs of carry.”

A spokesman for Reliance didn’t immediately respond to an email and phone call seeking comment.

Reliance is rated BBB+ by Ratings, two levels higher than the Spreads on its 2025 bonds rose to 165 basis points over US Treasuries on Monday, near the widest in more than a year, after touching an all-time low of 117 in November. The move is in line with other investment-grade Indian companies, which offered 170 basis points more on average, climbing from this year’s low of of 117 on January 26, according to an index compiled by Lynch.

First Published: Mon, June 11 2018. 16:33 IST