Mukesh Ambani led Reliance Industries Limited (RIL) is setting new standards with its business operations and active involvement in various areas, including its oil refinery business and telecommunications project. The company is now planning to raise approximately $2.25 billion, which is expected to be amongst the largest offshore debt issues by a corporate company in India. RIL intends to do this mainly because it wants to replace high-cost borrowings which currently exist. Another reason for this move is the company’s plans to create a reserve for future development of its telecom venture.
RIL’s plans to raise funds
Sources familiar with the matter have stated that almost 10 to 12 investment bankers are participating. They even added that destinations like the Middle East, Europe, Asia, and North America will be the venues for the marketing roadshows. External commercial borrowings (ECB) are where the money will most likely be raised from in the form of a syndicated loan.
Previous funds raised by the company
In January and September 2016, Reliance Industries Limited had raised close to Rs. 30,000 crore through a rights issue. The funds were collected in these two months in two parts. In January 2017, RIL announced its plans to raise an additional Rs. 30,000 crore, which it plans on investing towards Reliance Jio, its major telecommunications venture. The amount would be raised through a rights issue of optionally convertible preference shares.
A source who is associated with the fund-raising project stated that RIL is expecting Indian corporate firms to participate actively, mainly because the offshore debt market seems lucrative as of now.
Investments made by RIL
Reliance Industries owns the largest oil refinery complex in the world, located at Jamnagar. The capacity of this refinery is estimated at 1.24 million barrels per day. The company had even made an investment worth $25 billion towards building its 4G mobile network, Jio. RIL, while announcing its earnings for quarter three in January 2017, stated that it plans on investing an additional $4.4 billion to strengthen Jio’s infrastructure and network capacity. Reliance Jio currently has 72.4 million subscribers, with 6 lakh users subscribing to the network carrier every day. Jio is expected to reach out to 90% of the country’s population.
Experts stated that Reliance Industries Limited will be spending a large amount of money in the upcoming quarters, with the money expected to be used in various avenues. According to sptulsian.com’s Founder, SP Tulsian, RIL’s pace of investment will remain consistent for two quarters.
The capital expenditure of RIL in the October to December quarter was Rs. 37,791 crore. The company also spent Rs. 81,691 crore towards its refining and petrochemicals projects at Hazira, Jamnagar, and Dahej, apart from spending on its gas and digital services businesses. RIL’s pet-coke degassifier project is expected to add $2 per barrel to the company’s margins. The company will also witness growth in margins in the next two years and also earn profits through its petrochemicals projects, according to US-based Bernstein Research. The research firm added that RIL’s success in its telecom venture will also help it corner a sizeable market share.
RIL is planning to raise $2.25 billion in order to develop its telecommunications arm, Reliance Jio.