Infocomm to raise Rs 3,750 cr

Infocomm plans further capital infusion.

Reliance Infocomm plans to raise Rs 3,750 crore in fresh capital by March 2005, according to documents the company filed with its bankers regarding a $250 million (approximately Rs 1,100 crore) syndicated loan the company raised last year.

The capital raising exercise could take the form of preference shares, equity or equity-like instruments such as convertible bonds. The company has committed to the syndicate of banks "" ABN Amro, ANZ Bank, DBS Bank and ICICI Bank "" that it would raise this amount the latest by 2004-2005.

Clause (X) of the agreement with the banks on "affirmative covenants" says: "The borrower undertakes to raise, by the end of FY 2005, no less than Rs 37.5 billion (Rs 3,750 crore) by way of new equity or preference shares or equity linked instruments including convertible bonds (with a final maturity that is greater than this facility)." Reliance Infocomm's current equity capital is Rs 3035.70 crore.

Reliance Infocomm also proposes to raise Rs 7,292 crore in fresh bank borrowings in 2004-05. The company needs the funds to boost its asset base from Rs 7,076 crore at the end of March 2004 to Rs 17,746 crore at the end of March 2005, an increase of Rs 10,670 crore.

Reliance Infocomm said it expected to fund this asset creation by raising fresh equity capital of Rs 3,750 crore and by borrowing from banks Rs 7,292 crore.

A Reliance Infocomm spokesman declined to comment on these issues.

The company has projected continuing losses in the year ended March 2005. Reliance Industries Vice-Chairman and Managing Director Anil Ambani's had told Business Standard after a press conference on October 25, 2004 to announce Reliance Industries' results, that Reliance Infocomm would break even by the end of this financial year.

He had then said: "Reliance Infocomm has had rapid growth, signing up 10 million subscribers in just 18 months. At this pace, we expect the company to be in the black by end of the fourth quarter of this fiscal." He added that Reliance Infocomm incurred a loss of Rs 50 crore in the quarter ended September 2004.

But according to the documents, the company's losses are expected to mount from Rs 395.3 crore at the end of the accounting year ended March 2004 to Rs 621.6 crore in March 2005.

According to the projection, Reliance Infocomm will in the financial year ended March 2006 make a profit ("accumulated surplus," according to the document) of Rs 1,659.9 crore. The profit will be Rs 8,501.7 crore in March 2007.