Reliance planning $2.5 bn overseas debt issue to fund Jio expansion
23 Jan 2017
Reliance Industries Ltd is planning to raise $2.25 billion (around Rs15,300 crore) to replace its high-cost borrowings and also create a war chest to fund its aggressive expansion strategy in telecom sector.
The funds from the biggest offshore debt issues by an Indian corporate will be raised in the form external commercial borrowings (ECBs), thorough a syndicated loan, sources close to the development said.
Roadshows for the issue are expected to begin soon and, according to reports, at least 10 to 12 investment banks are involved in the marketing of the issue across North America, Europe, the Middle and Asia.
The securities are expected to be priced at 90-100 basis points over the London Interbank Offered Rate (Libor) – at about 2.60-70 per cent. (The US 12-months Libor is now at 1.70 per cent.).
Reliance Industry's telecom arm Reliance Jio Infocomm Ltd is also planning to issue rights shares to raise resources for a planned Rs30,000 crore (about $4.4 billion) network expansion to boost coverage and increase capacity, which would help the company reduce its dependence on other telecom operators for interconnectivity.
The fresh investment in network expansion will take total investment in the network close to Rs1,90,000 crore.
"In view of the unprecedented customer response to Reliance Jio's services as well as address the anticipated growth in demand for digital services, additional investments are proposed to be made into the network to enhance its coverage and capacity," Reliance Jio said in a rights issue notice for existing shareholders on Friday. These investments are proposed to be financed largely through an equity offering to strengthen its balance sheet for growth, it added.
"The company wishes to inform that board of directors at its meeting held on January 13, 2017, has decided to make a rights issue of 6 billion - 9 per cent non-cumulative optionally convertible preference shares of Rs10 each for cash, a premium of Rs40 per OCPS, aggregating Rs 30,000 crore," the notice read.
As of 31 December, within four months of its commercial launch, the company garnered 72.4 million subscribers. Reliance Jio has been adding about 6 lakh users per day.
Reliance Jio started offering free 4G service during the trial phase which it continued even after its commercial launch on 5 September and has since extended its free 4G service till 31 March 2017.
Jio is also offering free unlimited local and STD call for lifetime even during roaming.
