Reliance Industries, which is sitting on over Rs 75,000 crore in surplus cash, today launched an issue of bonds in Hong Kong and Singapore markets to raise a minimum USD 500 million (around Rs 2,700 crore), company sources said.
This is the fifth time that the Mukesh Ambani-led company is raising long-term debt this fiscal. So far, it has raised USD 4 billion from overseas in the current financial year.
"The company is planning to raise at least USD 500 million by issuing perpetual bonds. The issue hit the markets today and the final amount will depend on the investor appetite. The initial pricing is 6 per cent over the US treasury," an RIL official who did not wish to be named said.
Perpetual bonds are those with no maturity date, therefore, it may be treated as equity, not as debt. Perpetual bonds pay coupons forever and the issuer does not have to redeem them. Their cash flows are, therefore, those of a perpetuity.
However, he expressed hope that the final pricing will be much below the guidance because of the strong fundamentals of the company.
When asked why it is raising debt despite sitting on over Rs 75,000 crore surplus cash, the official said, the interest rates are at historical lows and hence it's a good time for Reliance to raise long term money and that the long term nature of the bond is in line with the long term assets of the company.
He further said bank of America, Citi, HSBC, Barclays Deutsche Bank, JP Morgan and RBS are mandated for the issue.
The RIL official also said this first senior long-rated bond issuance by a domestic company.
The funds will be used to meet the capex requirements of the company that runs the world's largest refinery at Jamnagar.
The senior unsecured perpetual notes have 'BBB' rating from S&P, the rating said in a note.