Reliance raises $4bn in India’s biggest overseas bond sale

Mukesh Ambani’s Reliance Industries has raised $4bn in dollar-denominated debt in the biggest overseas bond sale by an Indian company.

The issuance by India’s largest publicly traded company continues a strong trend for overseas debt raises, which hit a record high of $22bn in 2021. Reliance’s raise dwarfed last year’s single biggest debt issue of $1.25bn by Bharti Airtel, the telecoms company.

Three tranches of fixed rate notes, due in 10, 30 and 40 years respectively, were three-times oversubscribed and mostly allocated to fund managers.

Reliance now has a better credit rating than India, with its bonds given a BBB+ rating by S&P, which judges the country at BBB-. The group will pay interest rates of 1.2 per cent over the US Treasury benchmark for the 10-year bond and up to Treasury plus 1.7 per cent for the 40-year bond.

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The energy-to-telecoms conglomerate has spent years ploughing money into Jio, its mobile telecom business that has transformed the market in India by undercutting rivals. In 2020, Reliance raised Rs531bn ($7bn) in India’s largest rights issue to cut down its debt pile and the debt-to-equity ratio now stands at 0.37, down from 0.76 two years ago.

Reliance’s board approved borrowing $5bn last week to take advantage of the ultra-low interest rate environment to refinance its debt, including more than $1bn in loans which come due next month.

“The proceeds from the issuance of the notes will be utilised primarily for refinancing of existing borrowings,” the company said in a regulatory filing.

The bonds are set to be listed on the Singapore Stock Exchange.

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Vivekanand Subbaraman, research analyst at Ambit Capital, said that the bond would help Reliance with “refinancing and growth capital requirements.”

The company was able to achieve such a low interest rate because investors see it as “the quintessential India growth story”, he added. “It’s a bet on India.”

Reliance’s highest earning business is oil refining but profits have been hit as energy demand waned during the pandemic. The group reported 2021 consolidated earnings before interest, tax, depreciation and amortisation of $13.3bn, down 4 per cent compared with the previous year.

The sprawling conglomerate has embarked on an ambitious green energy acquisition and investment spree and is expanding aggressively in retail and mobile telecoms, backed by investors including Facebook and Google.

Ambani said this month that he was succession planning for the family-owned conglomerate. “All seniors, myself included, should now yield to the highly competent, extremely committed, and incredibly promising young leadership talent we have,” he told employees in a speech, naming his three children as “next generation leaders”.

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