In the US, 10-year treasuries saw yields jump over 13 basis points on the first day of trading, while rates in India are also rising as the RBI draws out surplus liquidity from money markets.
On Tuesday, Moody’s had given a Baa2 rating for RIL’s proposed $5 billion fund raise. The company is raising funds from global institutional investors by taking advantage of Section 144A of the US Securities Act, which allows discounts for offers and sales to large ‘qualified institutional buyers’ in the US. RIL’s adjusted net debt/operating profit as on September 30, 2021 was estimated at approximately 1.1x.
Reliance Jio Infocomm plans to raise Rs 5,000 crore through five-year bonds at less than 50 basis points
(100bps = 1 percentage point) over the current yield on 5-year government bonds, which is 5.8%. Last year, the telecom unit had repaid most of its high-cost debt after raising equity funds from several private equity investors. Now, the company is looking to make big investments to launch 5G services again.
Bankers say though yields have hardened, it is a good time to lock in longer-term rates as the RBI is widely expected to start raising its rates after April. Reliance Industries did not comment on its fund-raising plans.
The group started the new year with Reliance Industries announcing that its solar unit would buy UK-based sodium-ion battery technology provider Faradion for $135 million, as part of its push into the renewable energy segment. Is.
In the petrochemical business, Reliance Industries said last month that it would partner with Abu Dhabi Chemicals Derivatives Company. RSC (TA’ZIZ) and invest $2 billion in setting up a petrochemical production facility in the United Arab Emirates.
According to Moody’s, Reliance Industries’ existing cash, along with expected cash inflows from operations, will be sufficient to cover its cash outflows for capital expenditure and debt maturities over the next 18 months. Last November, it received about Rs 266 billion in proceeds from the last call on its rights issue, further increasing its liquidity.
Given its presence in the refining and petrochemicals, digital services and consumer retail sectors, Reliance Industries has little or no linkage in its sources of income. These three segments together generated approximately Rs 944 billion ($12.6 billion) or 86% of RIL’s consolidated operating profit for the 12 months ended September 30, 2021.
The company’s announcement of raising tariffs for its digital services business is positive for the telecom industry, while easing pandemic-related disruptions will boost demand for oil and gas as well as consumer spending. “The resurgence of coronavirus infections due to the emergence of new variants could result in a fresh lockdown and impact the company’s refining and petrochemical and retail earnings,” Moody’s said.
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