RIL in largest offshore loan deal of $1.5 bn

Entire loan may be priced at about 135 basis points over Libor.

Reliance Industries plans to raise $ 1.5 billion (nearly Rs 7,250 crore) offshore loan, the biggest ever by an Indian corporation.

While a Reliance spokesperson refused to comment on the issue, Basis Points, a Reuters subsidiary, which specialises in providing information on overseas debt plans of corporations, said one of the tranches of the two-part loan was expected to have a door-to-door tenor of 10 years, the longest ever by an Indian corporate.

The entire loan would be priced at about 135 basis points over Libor (London Inter Bank Offered Rate). The company was in talks with at least 15 banks for underwriting of nearly $300 million, it said.

The arrangement for the loan follows the announcement of an expansion plan of nearly Rs 50,000 crore by RIL Chairman Mukesh Ambani at the company's last annual general meeting.

At this meeting, which was the first general meeting after the demerger of the Reliance empire was announced, Reliance Industries said half of the investment would go for doubling of petroleum capacity at Jamnagnagar.

"This is not the first loan the company proposes to raise since the mega expansion plan was announced in August, but the size of the loan makes it different," said an analyst.

In the calendar year 2005, Reliance had raised $1.6 billion through a series of external commercial borrowings (ECBs) for refinancing of old loans, modernisation and import of capital goods.

Reliance, it may be recalled, is the only company in Asia having the distinction of issuing 100-year bonds in the international capital markets.

In addition to doubling the petroleum refining capacity, Reliance requires to fund a whole lot of activities. It will begin full-year gas production from the Krishna-Godavari basin from 2009-10 after spending Rs 17,000 in upstream oil and gas over the next few years. Reliance will also invest Rs 2,500 crore in building a new 280,000 tonne-per-year polypropylene plant.

Another Rs 3,000 crore would be invested to scale up its polyester production capacity.