Mukesh Ambani-owned Reliance Industries has raised $800 million through a 10-year bond issuance, to refinance existing debt. Significantly, the bonds were priced at 3.66 per cent, the lowest coupon ever achieved by an Indian corporate for a ten year issuance, the company noted on Tuesday.
The senior unsecured notes due by 2027 have been priced at 130 basis points over the 10-year US Treasury note. It will bear a fixed interest of 3.667 per cent per annum, with interest payable semi-annually in arrears.
“This refinancing transaction was well received by high quality investors across asset managers, insurance companies and banks and helped us achieve substantial savings in interest cost over the life of the notes,” said V. Srikanth, joint CFO of Reliance.
The company's bond issuance comes just days after ratings agency Moody's upgraded India's sovereign bond rating.
Moody's Investors Services lifted India's sovereign bond rating to Baa2 from Baa3, and changed its outlook to stable from positive.
Any ratings upgrade implies that the bond issuer has a lesser chance of defaulting on payment.
This upgrade will have a wider positive effect on Indian corporates, looking to raise funds via bonds issuance, as it is expected to boost demand for offshore bonds and lower borrowing costs on dollar denominated debt of Indian issuers, say experts.
The Reliance issue has been assigned Baa2 rating by Moody's, the same rating as that of India's sovereign bonds. Standard & Poors assigned BBB+ rating to the Reliance notes issue.
The company will use the proceeds to redeem its existing 5.875 per cent senior perpetual fixed rate unsecured notes.
Reliance's debt has risen to around Rs 2.14 lakh crore at the end of September, on the back of huge investments it has made over the last few years in the Jio 4G telecom business.
But, investors are more convinced on the company's repayment prospects, given the huge cash flows it generates from its refining and petrochemical business, where it has recently completed the bulk of its capital expenditure spends. The company had cash in hand of about Rs 77,000 core at the end of September.
Reliance is on track to achieve earnings before interest, depreciation and amortization of about Rs 70,000 crore in the current financial year ending March 2018 and Rs 90,000 crore in 2018-19, S&P said.
Goldman Sachs also raised its target price of Reliance on Tuesday to Rs 1,205 from Rs 960. With the capex largely completed for now, the foreign brokerage expects Reliance's operating income to double by March 2020. The company's refining margins are expected to outperform peers, while petrochemicals will also be a key driver for growth.
Reliance's shares closed up by 1.5 per cent at Rs 932.40 on the BSE.
