Integrated telecommunications service provider Reliance Communications (RCom) has prepaid a term loan of Rs 5,000 crore raised from Indian banks a year earlier. The pre-payment would help the company make interest savings of Rs 700 crore a year.
The company paid the loans from its internal accruals and cash reserves, and on an average of three years ahead of schedule. The term loans were taken from State Bank of India, Punjab National Bank and IDBI, according to sources.
The Anil Ambani group company has cash reserves of Rs 5,000 crore after repaying these loans, raised in Indian currency. RCom had raised around Rs 10,000 crore as term loans during the last year in rupee terms, of which half has been repaid. The repayment date for the remaining Rs 5,000 crore starts from 2011, they added.
According to a recent study by HSBC Global Research, RCom had a net debt of around Rs 24,117 crore (estimated) and a cash reserve of around Rs 6,500 crore (including 'others’) for the financial year 2009.
When asked, an RCom spokesperson declined to comment. He, however, stated that the debt of Rs 24,117 crore was mainly that raised in foreign currencies.
According to sources, RCom’s cash flows and internal accruals rose “significantly” in this calendar year, following its GSM launch. The company is utilising these cash flows to strengthen its balance sheet by reducing debt, while it would also help in reducing interest outgo.
For the company, the peak capital expenditure cycle is also over. RCom had earmarked a capex of Rs 10,000 crore for GSM rollout (across 11,000 towns and 3,40,000 villages) and expansion of enterprise and global businesses.
However, according to industry sources RCom might need at least Rs 7,000 crore for rolling out 3G services, including Rs 4,000 crore for the nation-wide 3G infrastructure and a minimum of Rs 3,500 crore as base price for spectrum auctions.