Reliance Industries, which is sitting on over Rs 75,000 crore (Rs 750 billion) in surplus cash, today launched an issue of bonds in Hong Kong and Singapore markets to raise a minimum $500 million (around Rs 2,700 crore), company sources said.
This is the fifth time that the Mukesh Ambani-led company is raising long-term debt this fiscal.
So far, it has raised $4 billion from overseas in the current financial year.
"The company is planning to raise at least $500 million by issuing perpetual bonds.
"The issue hit the markets on Monday and the final amount will depend on the investor appetite.
"The initial pricing is 6 per cent over the US treasury," an RIL official who did not wish to be named told PTI.
Perpetual bonds are those with no maturity date, therefore, it may be treated as equity, not as debt.
Perpetual bonds pay coupons forever and the issuer does not have to redeem them.
Their cash flows are, therefore, those of a perpetuity.
However, he expressed hope that the final pricing will be much below the guidance because of the strong fundamentals of the company.
Asked why it is raising debt despite sitting on over Rs 75,000 crore (Rs 750 billion) surplus cash, the official said, the interest rates are at historical lows and hence it's a good time for Reliance to raise long term money and that the long term nature of the bond is in line with the long term assets of the company.
He further
The RIL official also said this first senior long-rated bond issuance by a domestic company.
The funds will be used to meet the capex requirements of the company that runs the world's largest refinery at Jamnagar.
The senior unsecured perpetual notes have 'BBB' rating from S&P, the rating said in a note.
"The proposed notes will rank equally with all the company's other present and future unsecured and unsubordinated obligations," S&P said in a note from Singapore.
"The rating on Reliance reflects the company's strong competitive position and good business diversity.
In addition, "RIL has low leverage, and strong cash flows and liquidity," S&P said, adding the positive rating outlook reflects our view that the company has a large cash surplus to protect its financial strength against any potential deterioration in operating conditions.
This bond represents the first senior long dated/perpetual issuance by a domestic issuer after Tata Power's recent hybrid, RIL official said, adding only a only a select few Asian issuers have been able to access this market.
The transaction extends Reliance's maturity profile and establishes Reliance's credit curve in 10-year, 30-year and perpetual bonds, the official added.
Stating the final pricing will be really tight he said the recent issuances from MNCs like Prudential Plc had 5.25 per cent, Telekom Austria at 5.875 per cent, Banco Do Brasil's at 6.25 per cent and Axa's a 5.50 per cent among others.
