Reliance Jio to raise $1.5-bn debt abroad

Reliance Jio Infocomm, the telecom subsidiary of Reliance Industries, is set to launch a $1.5-billion (Rs 9,000 crore) debt issue abroad within weeks of Tata Steel raising over $1 billion.

The funds will be used by Mukesh Ambani’s company to refinance its costly debt and to roll out telecom and data services.

Reliance joins a number of large companies, including the Essar and Adani groups, which are raising loans abroad as interest rates in India remain high.

Reliance Industries was appointing bankers and the loan would be marketed in the next few weeks, a source who did not wish to be named said.

Bankers said Tata Steel raised $1.5 billion last Thursday through $500 million five-and-a-half-year bonds at a coupon rate of 4.85 per cent and $1 billion 10-year bonds at a coupon rate of 5.95 per cent.

Reliance Jio could expect similar rates as its debt would be backed by India’s most valuable company, bankers said.

Reliance Industries is aggressive in borrowing abroad for expansion and to pay off costly local loans.

Reliance Industries has invested Rs 33,000 crore (Rs 330 billion) in its telecom venture and Chairman Mukesh Ambani has promised to launch services next year by when the company would have pumped in Rs 70,000 crore (Rs 700 billion).

Analysts said this investment would dampen the company’s

return on equity.

“While we do not foresee a meaningful earning contribution from telecom over the next three-five years, we believe investors' perceptions of the valuation for Reliance Industries' telecom business would change and surprise positively,” Swiss bank UBS said in a report on July 21.

With the entry of Reliance Industries, the Indian telecom sector is poised for more competition.

Though company executives are tight-lipped, analysts said Reliance Industries would have to churn customers to build a base.

Other telecom companies are raising funds to finance their future plans. On July 9, Bharti Airtel, India’s largest mobile services company, raised $630 million by selling 3,100 cell towers in Africa to Helios Capital.

Bharti Airtel plans to raise $2 billion by selling 15,000 cell towers in Africa. The Tata group’s holding firm, Tata Sons, has invested Rs 2,500 crore (Rs 25 billion) more in Tata Teleservices so it can repay debt.

In June, Aditya Birla Group’s Idea Cellular raised Rs 3,000 crore (Rs 30 billion) by selling shares to a clutch of institutional investors.