Reliance Industries Limited to Raise INR 25,000 Crore for Jio Expansion Plan

Mukesh Ambani led Reliance Industries Limited (RIL) has sought permission from shareholders to raise INR 25,000 crore through non-convertible debentures. This is to replace existing high-cost borrowings and to fund the expansion plan of its telecom arm, Reliance Jio.

What are non-convertible debentures?

Non-convertible debentures are unsecured bonds. They cannot be converted into company stock or equity. In comparison to convertible debentures, these types of debentures usually have higher interest rates.

RIL’s fundraising plans

RIL is going to offer subscriptions for unsecured or secured redeemable non-convertible debentures in one or more series with a total nominal value up to INR 25,000 crore on the private placement.

Earlier in the Financial Year (FY) 2015-2016, the company had raised INR 30,000 crore in two parts through a rights issue. In January 2017, the company decided to raise another INR 30,000 crore to invest in Reliance Jio. The fund was raised with a rights issue of optionally convertible preference shares. Till date, RIL has invested almost INR 2 lakh crore in Reliance Jio.

How will Reliance Jio affect the telecom market?

Due to Reliance Jio’s free and low-priced offers, many telecom operators had to cut prices on their voice and data plans to keep at par and not lose market share. With the funds coming in through these debentures, Reliance Jio’s telecom plans are going to get a huge boost. This will make the market more competitive.

Proposals for the 40th Annual General Meeting

The company’s 40th Annual General Meeting (AGM) is to be held on 21st July 2017. As a part of the agenda for this meeting, RIL will take shareholders’ approval on the following:

  • To raise INR 25,000 crore by issuing debentures in order to meet the ongoing capital expenditures as well as general corporate needs.
  • Providing dividends at a rate of INR 11 per equity share of INR 10 each fully paid-up for the FY 2016-2017.
  • Amend an Article of Association to impose a five percent ceiling on equity purchase by non-promoters in Jio Payments Bank Limited till RIL is its promoter, to comply with the terms and conditions of the Reserve Bank of India (RBI).
  • To reappoint Nita Ambani as a Director in the company.

Also, the company will ask the Board of Directors to decide when the debentures are to be issued, what will be the face value of these debentures, the consideration for the issue, the coupon rate, the mode of payment, redemption period, and utilization of issue proceeds, among others.

Jio Payments Bank Limited

Jio Payments Bank Limited is the payments bank arm of Mukesh Ambani’s Reliance Jio. It was issued a license by the RBI to start the payments bank business in the country.

At present, with an equity share of 70 percent, RIL is the promoter of the payment bank. The State Bank of India (SBI) owns the remaining 30 percent share.

Summary

With the help of non-convertible debentures, Reliance Industries Limited (RIL) is all set to raise INR 25,000 crore to support its subsidiary, Reliance Jio’s expansion plan.

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