Reliance Industries to lock $4 billion in borrowings before Federal Reserve tapering

For a company that generates almost 65% of its revenues abroad, the plan is to lock in borrowing costs before the US Fed starts pruning its fiscal stimulus.

MUMBAI: RIL, India's second most-valuable company, is hitting the road to raise a little over $3.8 billion in the next few months from various financial institutions, exim banks and export credit agencies for a variety of corporate purposes across business verticals, said multiple sources aware of the development. The fund-raising plans are significant in the current state of acute pessimism where slow demand and regulatory hurdles have forced most companies to put large projects on hold.


For a company that generates almost 65% of its revenues abroad, the plan is to lock in borrowing costs before the US Federal Reserve starts pruning its fiscal stimulus - the $85-billion monthly bond purchase programme - later in the year.

To start with, RIL is finalising terms for a $1.75-billion overseas borrowing in August to refinance a $1.2-billion 2008 multicurrency facility and also to raise $550 million of new money for another six years. Simultaneously, the petrochemical-to-telecom conglomerate will be raising a $600-million loan by September as an ECB. It is also exploring raising another $1.5 billion as exim financing. Of this, while $750 million will come in from Korea Trade Investment Corporation (K-Sure) in lieu of telecom equipment imports for Reliance Jio Infocomm, negotiations are on with export credit agencies of the UK and France for the remaining quantum.

A RIL spokesperson refused to comment on the company's fund-raising plans.

Sources briefed on the matter said RIL will be leading the growing trend of corporate India's overseas fund-raising. Companies such as Essar Steel, Adani Enterprises and JSW have approached bankers to help them raise close to $5 billion overseas, largely to refinance and swap their high-cost rupee borrowings with cheaper foreign currency. But these groups are largely looking for refinancing; RIL is among a handful of local bluechips that are still keen to make fresh investments in India. Of the $3.8 billion it plans to raise later this year, only $1.2 billion is for refinancing.

These plans also have a bearing on India's widening current account deficit. At a time the government is said to be desperately trying to raise at least $5 billion through bond issues, either sovereign or quasi-sovereign, RIL alone can potentially come to the rescue of policymakers and push the needle on dollar inflows.

Importantly, if the company draws down the overseas loans it had already raised in the last 18 months for bankrolling capital spending, then in theory it can ease the pressure on liquidity and prop up the rupee.

Even though large chunks of the overseas funds are committed in lieu of import of equipment, a significant proportion is for rupee expenditures, and therefore, would lead to actual dollar inflows into India, said multiple sources aware of the terms of the agreements. Such terms are also unique, they add, as a result of hard negotiations with each agency by Reliance.

Beginning 2012 till date, RIL has raised close to an unprecedented $10 billion across group companies in India and the US. Of these, $6.4 billion were in the form of external commercial borrowings (ECBs) from various financial institutions, exim banks and export credit agencies. But according to sources close to the company, it is yet to draw down a lion's share of these funds, even though all the loan approvals are in place. As per their estimates,RIL is yet to draw down close to $4.5 billion.

The Reliance spokesperson declined to comment on the break-up of the quantum alreadyutilised, amounts still pending or the payment timelines, citing confidential commercial information.

The company had already outlined its plans to spend Rs 1.5 trillion ($24.6 billion) over the next three years to grow its diverse set of businesses like natural gas and petrochemicals and telecom. And most of the recent fund-raising was to support the planned $12-14 billion petrochemicals expansion in Gujarat that started end-2010.