Eye on consumer biz, Mukesh Ambani's RIL plans to raise Rs 400 bn in FY19

Reliance's total debt has tripled in the past 5 years as it borrowed to fuel more than Rs 3.3 trillion of spending on a new telecom venture

Reliance Industries Ltd., India’s second-largest company by market value, plans to raise about Rs 400 billion ($5.8 billion) in fresh debt this financial year as it expands its consumer businesses, according to people familiar with the matter.

The billionaire Mukesh Ambani-led company will raise funds through loans and bonds, mostly in the Indian currency, the people said asking not to be named as they are not authorised to speak to the media. Of this, the refining-to-retail conglomerate already has shareholder approval to raise as much as Rs 200 billion through non-convertible debentures.

Reliance’s total debt has tripled in the past five years as it borrowed to fuel more than Rs 3.3 trillion of spending on a new telecom venture and its traditional petrochemicals business. Ambani will invest this year to roll out fiber-based broadband services and on acquisitions, including the purchase of telecom assets from brother Anil’s Reliance Communications Ltd. The company has total borrowings of about Rs 2.2 trillion, more than half of which is due to be repaid by 2022, according to data compiled by Bloomberg.

Net liabilities will probably increase this year, mostly due to the Reliance Communications transaction, before falling in the financial year ending March 2021 as cash flows improve, said Somshankar Sinha, a Mumbai-based analyst at Jefferies India. “Reliance needs funds to refinance existing long-term debt or replace short-term debt with longer tenors, and to fund its announced acquisitions.”
 

Reliance has agreed to pay about Rs 173 billion to purchase spectrum, mobile-phone towers and fiber assets from Reliance Communications and another Rs 50 billion for textile-maker Alok Industries, which it won in an auction under India’s bankruptcy rules.

There are investments planned for the fiber-based broadband services, JioGigaFiber, that will launch across 1,100 cities in August under the umbrella of telecom unit Reliance Jio Infocomm Ltd., the people said. In addition, the conglomerate will spend on acquiring apparel brands and opening new retail outlets, one of the people said.
 

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A spokesman for Reliance didn’t respond to an email seeking comment.
 

Reliance’s better-than-sovereign rating has helped it raise cheaper debt while actively investing cash reserves that reached Rs 781 billion last financial year. Other income accounted for about a fifth of its profit before tax in the 12 months to March 31 -- much of it earned by investing the cash. The company has a BBB+ credit score from S&P Global Ratings, two levels higher than the Indian government.

Reliance returned to the local-currency bond market after a more-than-seven-year absence last year, raising Rs 200 billion via six offerings between August and November. The conglomerate priced some notes maturing in three years or slightly more in the range of 6.78 percent to 7.07 percent -- lower than the 7.15 percent average yield on top-rated three-year corporate bonds during the same period.
 

Unit Reliance Jio on Tuesday sought bids to raise Rs 15 billion via three-year notes after tapping the rupee bond market four times already this year.

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