Reliance Industries has mopped up Rs 8,500 crore from the sale of non-convertible debentures (NCDs), cashing in on the cheaper funds flooding the debt market that is starved of quality paper, priced it at 7.20 per cent.
The debt market is flushed with money after the Reserve Bank of India (RBI) opened a special repo operations called the targeted long term repo operations (TLTRO) on March 27, which offers banks funds at the repo rate which is currently pegged at 4.40 per cent.
The Reliance Industries (RIL) offer gives a coupon of 280 bps premium on the repo rate.
RIL has mopped up Rs 8,500 crore from an NCD issue today (Friday). The issue consist of a three-year fixed tenor tranche of Rs 4,000 crore offering 7.20 per cent coupon, and a Rs 4,500-crore floating rate tranche offering 7.2 per cent, which is a 280-bps spread over the repo rate, a market source told PTI.
The issue, which had hit the market Thursday, has been mostly subscribed by State Bank of India, HDFC Bank, ICICI Bank and Axis Bank, the source added.
The company was planning to mop up Rs 9,000 crore in two tranches of Rs 4,500 crore each in with a fixed rate and floating rate coupons of 7.20 per cent.
It can be noted that RIL is the most-cash rich company as also one of the most indebted corporates sitting on debt pile of over Rs 1.54 lakh crore as of March 2020.
According to an exchange filing, RIL would use the proceeds from the NCD sale to repay existing rupee loans and would be issued through a private placement of consisting of 30,000 unsecured redeemable fixed coupon, non-convertible debentures under the PPD (privately placed debentures) series K1.
Each NCD has a face value of Rs 10 lakh each aggregating to Rs 3,000 crore along with a greenshoe option for oversubscription up to Rs 1,500 crore, aggregating in cash to Rs 4,500 crore.
The RBI had promised to pump Rs 1 lakh crore to the market through the targeted long term repo operations (TLTRO). Of the total amount it has already infused Rs 75,000 crore into the system and the final tranche is in the market as this copy is being written.
Under the TLTRO announced on March 27, banks get three-year funds at the repo rate of 4.40 per cent but have to invest 50 per cent of the fund in NCDs/CPs or any other corporate debt.
Earlier this week the RBI however, restricted single company exposure to 10 per cent of the raised amount - which means say if SBI has mopped Rs 10,000 crore through this route it can invest only Rs 1,000 crore of this in the RIL issue.
According to media reports, the TLTRO window is being tapped by HDFC, PowerGrid, NHB and also Hudco.
The Reserve Bank announced the TLTRO at lower yields to be parked in the secondary market and invest in primary issues as part of its initiatives to help borrowers cope with the economic damage inflicted by the Covid-19 pandemic.
Earlier in the day on Friday, RBI Governor Shaktikanta Das said that it has been decided to conduct targeted long-term repo operations (TLTRO 2.0) for an aggregate amount of Rs 50,000 crore, to begin with, in tranches of appropriate sizes.
The RIL debentures are rated AAA/Stable by both Crisil and Care Ratings, the filing had said, adding the issue will hit the market on April 16 and close the next day and will have a three-year tenor with annual coupon payout.
While Axis Trustee Services has managed the issue which will be traded on bourses, Link Intime was the registrar and HDFC Bank was the arranger.
For the quarter to December 2019, RIL's consolidated turnover stood at Rs 1,68,858 crore and net profit at Rs 11,640 crore.
The RIL counter was trading 2.7 per cent up at Rs 1200 on the BSE whose benchmark Sensex that was trading up 1.7 per cent up at 1240 hrs.
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