RIL lands $2bln loan from 9 German banks backed by Euler Holmes

The petrochemical expansion project of RIL (Reliance Industries Limited) at Jamnagar, Dahej, Silvassa and Hazira earned its wings with nine German banks offering a loan of $ 2 billion. Euler Hermes Duestchland AG covered this long-term loan on 7th May, 2012 at Berlin in Germany. The primary aim of this Reliance Industries German loan will be to provide funds for goods and services provided by German suppliers that to be used in the petrochemical expansion project.

RIL, India’s largest private sector entity, announced in its filing to the BSE (Bombay Stock Exchange) that this is among the largest underwriting by Euler Hermes. Besides, it has been the first company to be honored with a ‘Better than Sovereign’ rating by Euler Hermes. With a door-to-door maturity of 13 years, this long-term debt can be perceived as a cost-effective one. The strong ties, this conglomerate shares with international banks is reflected by the deal gaining 50% over subscription. This deal will effectively facilitate the funding for variegate plans of RIL. IPEX-Bank GmbH, Nord LB, Banco Santander, Ladensbank, Baden-Wurttemberg, Commerzbank AG, Citibank, DZ BANK AG, BHF-BANK AG and ING Bankare the nine banks to finance the deal.

The annual report of RIL reflects its effective liability management where it reduces the cost of debt by imbibing finances at low cost rates. The capital accumulated in FY2011-12 at an all time low costs with subsidized interest rates enabled it to reduce the cost of debt in a cogent way that year. With external commercial borrowings of $1.09 billion, RIL refinanced its loan lucratively.

V Srikanth, Joint Chief Financial Officer of RIL, stated that they were pleased with landmark financing backed by Euler Hermes. Thanking the German banking institutions for this massive support, he also expressed his delight for the ‘Better than sovereign’ ranking by Euler Hermes for their powerful credit sharing in the international platform.

The refining and petrochemical sector can witness a threshold of advancement and progress in the next 4-5 years with RIL announcing its investment of US$12 bln in this sphere. The major part of this investment over US$4 bln will be involved in the production of synthetic natural gas that will serve as an effective alternative to pricey LNG as a fuel. It will also work on leveraging its present capacities of PET, PFY, chemicals such as paraxylene, PTA, and polyester. The RIL expansion project also aims to add products like carbon black and rubber.

The total debt of RIL accounts to Rs 68,259 crore according to its annual statement of the financial year ended March 31, 2012. On the other hand, its assets amounted to Rs 70,252 during this period making it the largest company by market value.

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