To cash in on cheap funds flooding the debt market through the targeted long-term repo operations route, Reliance Industries (RIL) will raise ₹9,000 crore through an NCD sale to refinance the existing high-cost rupee debt.
The most cash-rich company is also one of the most indebted corporates sitting on debt pile of over ₹1.54 lakh crore as of March 2020.
According to an exchange filing, RIL is launching a ₹9,000-crore non-convertible debenture (NCD) issue on April 16 and the proceeds from the debt sale will be used to repay existing rupee debt.
The issue has two components: a ₹4,500-crore fixed rate tranche and an equal tranche with floating rate and both the issues are offering a coupon of 7.20%-4.40% of repo with a spread of 2.80%.
The NCDs will be issued through a private placement, which will consist of 30,000 unsecured redeemable fixed coupon, non-convertible debentures under the privately placed debentures (PPD) series K1.
Each NCD has a face value of ₹10 lakh each aggregating to ₹3,000 crore along with a greenshoe option for oversubscription up to ₹1,500 crore, aggregating in cash to ₹4,500 crore.
In the floating interest rate tranche, RIL will issue 35,000 unsecured redeemable, non-convertible debentures under the PPD Series K2 each having a face value of ₹10 lakh, aggregating in cash to ₹ 3,500 crore with an option to retain oversubscription up to ₹1,000 crore aggregating to ₹4,500 crore.
If it raises the targeted ₹9,000 crore, this is nearly a tenth of the ₹1 lakh crore liquidity RBI has promised to pump into the debt market through the targeted long term repo operations (TLTRO). Of the total amount it has already infused ₹75,000 crore into the system.
Under the TLTRO announced on March 27, banks gets three-year funds at the repo rate of 4.40%, but have to invest 50% of the fund in NCDs/CPs or any other corporate debt.
According to media reports, the TLTRO window is being tapped by HDFC, PowerGrid, NHB and also Hudco.
The Reserve Bank announced the TLTRO at lower yields to be parked in the secondary market and invest in primary issues as part of its initiatives to help borrowers cope with the economic damage inflicted by the Covid-19 pandemic.
The debentures are rated AAA/Stable by both Crisil and Care Ratings, the filing said, adding the issue will hit the market on April 16 and close the next day and will have a three-year tenor with annual coupon payout.
While Axis Trustee Services is managing the issue which will be traded on the bourses upon closing, Link Intime is the registrar and HDFC Bank is the arranger to the issue.
For the quarter to December 2019, RIL’s consolidated turnover stood at ₹1,68,858 crore and net profit at ₹11,640 crore.
The RIL counter closed at ₹1,189.25 down 2.5% on the BSE whose benchmark Sensex closed with ₹1.5% loss on April 13.