India’s largest private sector company — Reliance Industries has hit the overseas debt market with a $800-million (about Rs 5,200 crore) bond sale programme as it seeks to pare a portion of its high cost debt that stands at over Rs 2.14 lakh crore.
“Reliance has hit the overseas debt market with a $800-million issue,” an investment banker quoted in a media report, while requesting not to be quoted as the issue is yet to be priced and closed.
Meanwhile, rating agency Moody’s on Monday assigned a Baa2 rating to the proposed unsecured bond sale by RIL. The bonds will rank pari passu with RIL’s other existing and future unsecured and unsubordinated obligations, it said assigning the Baa2 rating.
For the September quarter, RIL, which has a market capitalisation of close to Rs 6 lakh crore, had a cash pile of Rs 77,014 crore and a debt of Rs 2,14,145 crore, up from Rs 1,96,601 crore in the previous quarter.
The Mukesh Ambani-led RIL has been borrowing heavily for expansion and an entry into telecom space with Reliance Jio in which it has invested over Rs 1.4 lakh crore. That apart it has pumped over Rs 1 lakh crore into its core refining and petrochemicals expansion which is now completed.
“The Baa2 rating reflects RIL’s ability to generate operating cash flows, with annual EBITDA of over $10 billion from its large-scale integrated refining and petrochemical operations that generate strong margins, and its nascent but growing digital services business,” said Vikas Halan, a vice-president and senior credit officer at Moody’s.
“The rating also incorporates the increase in RIL’s business risk because of its growing digital services business and our expectation that high cash outflow for capital spending will keep its free cash flow negative over at least next 18 months,” added Halan, who is also Moody’s lead analyst for Reliance.
Early November, Moody’s had lowered RIL’s credit rating outlook to stable while affirming its overall ratings, citing likely negative free cash flow due to heavy debt repayments over the next 18 months.
Moody’s had said RIL would see large cash outflow over the next 18 months towards paying back its creditors for the billions of dollars of capex it had incurred on telecom and refining and petchem expansions.
“Such payments along with additional capex towards telecom will constrain any reduction in net borrowings until fiscal 2019,” Moody’s had said.
This would lead RIL to tap the debt market more as a result of which it would not be able to reduce its debt and its free cash flow will be in the negative territory for the next 18 months or so.