New Delhi: Billionaire Mukesh Ambani is in the process of selling ₹12,500 crore, or nearly $1.3 billion, worth of bonds for his firm, Reliance Industries Limited (RIL). It would be the largest listed bond issue by RIL this year so far and the first rupee bond sale by the telecom firm in almost 3 years.
The money will come from five year notes, according to those who are close to the situation. These notes will pay an interest rate (or a coupon) of 7.47% annually. Big private banks are assisting in the arrangement of the deal: Axis Bank, ICICI Bank, HDFC Bank and YES Bank. A portion of the bonds will also be purchased by some of these banks.
In the week ending September 18, investors will have an opportunity to offer their bids. The planned sale, if it is executed, would be the biggest single bond issue from an AAA bond-rated Indian company since November 2023. At that time, RIL had sold the bonds worth ₹20,000 crore, which were the largest bond issue in local currency to date by a non-banking company in India.
So what is the reason behind RIL opting for rupee bonds this time? The borrowing cost in the Indian rupee has been reduced recently, according to experts. The interest rates of Indian government bonds have been falling in the last few months, primarily due to the influx of dollar money. Meanwhile, currency borrowing has risen in cost in the US dollars, as interest rates have increased in the USA. The result is that big companies will be making better use of local bonds at the moment.
Besides, RIL is reportedly mulling a standalone, prolonged 10-year bond sale and has already started conversations with banks and investors on the matter.
The bond sale is likely to inject new momentum into the relatively subdued local debt market in India this year. Many companies have opted for loans instead of bonds, as the rates for loans have remained low. But, if Reserve Bank of India’s policy rates are likely to be increased later this year amid inflation concerns, more companies are likely to be scrambling to take loans with attractive rates, with the possibility of issuing bonds.
RIL has not yet been able to comment on the reports.
