Faced with a depreciating rupee and increasing costs abroad for Indian borrowers, Reliance Telephones (rtpl) is reducing foreign debt exposure for its basic telecom project in Gujarat. The promoter, Reliance Industries, plans to halve its external commercial borrowing (ECB) target from $642 million to around $300 million.
The balance $342 million that was to be raised from the ECB market will now be sourced from domestic markets, sources said. This will take the projected rupee debt of the project to $547 million (Rs 2023.90cr). The company recently concluded a Rs 100 crore bond issue for the project. This issue is RTPLs first in the domestic debt market.
RTPL is also holding talks with telecom vendors like Motorola and Qualcomm, for supply of equipment. It is likely to negotiate suppliers credit for the equipment supply contract expected to be valued between $300 million and $350 million in rupee terms.
If finalised, the suppliers credit agreement will be the first to be concluded in rupees. Most such deals, which are backed by export credit agencies of the vendors home countries and banks, are closed in foreign currency terms. The lenders prefer to let the borrower take on the forex risk.
The projects capital outlay is projected at $1.27 billion (Rs 4,763 crore) in the initial years. RTPL, which is a 90:10 venture with Nynex of the US, has an equity projection $423.42 million. Of this, Reliance Industries plans to place 38 per cent with international investors, including FIIs, multlilateral agencies and others through global depository receipts or American depository receipts or foreign currency convertible bonds.
Reliance, which will continue to hold 52 per cent in RTPL, will put in $220.18 million and Nynex will pump in $42.34 million, with the remaining $160.90 million foreign equity being held abroad by institutional and other investors. Earlier, the equity for the basic telecom services company was pegged at $255 million, which was increased to $423.42 million in August this year.
RTPL proposes to start services in Baroda, Ahmedabad, Surat, Jamnagar and Rajkot by the end of this year. According to its project proposal, it will employ 4,000 directly and another 10,000 indirectly. It has been aggressively hiring personnel for the project in the past few months.
Reliance signed the licence and interconnect agreements with the department of telecommunications in March. It paid Rs 97 crore as the first instalment for the Gujarat basic telecom project. The company is committed to paying Rs 3,396 crore as licence fees for the circle.
