Reliance became debt-free when it raised Rs 168818 crore by a series of stake sale deals in business and with the right issue. In the last AGM, Reliance Industries announced its plan to invest Rs 75000 crore in renewable energy.
As a result, it has raised $4 Billion, the largest ever foreign currency bond issuance by any Indian Company.
Details about the Bond Issuance By Reliance Industries
Reliance came forward and opened the subscription of bonds for $4 Billion. Although the announcement was made in the AGM, the issue was subscribed by the three nearly times peak order book aggregating $11.5 Billion.
The three tranches that were mainly focused at the time of note issuance of US Dollar Bond is:
- $1.5 Billion for ten years at 2.875%
- For 30 Years, it is $1.75 Billion at 3.625%
- For the 40 years of the term, it is $750 million at a 3.750% coupon rate.
- The notes have been priced at the basis points of 170, 160, 120 over the US Treasury Benchmarks.
- The issue has been made with 200 different accounts majorly from the United States, Asia, and Europe.
- It has received the highest rating as well that is given to the Indian Company on such bond issuance.
- The interest on the notes will be payable semi-annually arrears. The notes are ranked with the secured and other unsubordinated obligations Reliance.
How will Reliance be benefited?
- It brings down the cost of funds even more and will make the repayment tenure a bit longer.
- The company also planed to use the proceeds of the existing borrowings.
This is how the company will get benefits from this issuance. It can also be a good news for investors as well.
Who Received the Bonds?
The notes are further distributed to the high-quality fixed income accounts of 2% to public institutions, 24% to the insurance companies, 69% to the fund managers, and 5% to the banks.
The company has not revealed the investors who subscribed to the bonds. However, according to the market experts, some of the bidders included BFAM Opportunities Fund, China Life Insurance, Singapore-based UOB Asset Management, Fidelity, Mizuho Bank.
Brokerage Target Price By the Company
ICICI Direct has a buy call on Reliance Industries. The target price was assumed to be Rs 2960 by the brokerage firm. The current market price of Reliance Industries is Rs 2450. So, many investors are waiting for the great, but what you think is it really a good news for investors? Let’s have a mini conversation on how investors will be benefited, or whether is good or bad investors.
Good For Investors?
Investors usually track the bond prices to know that the Bond issued by the Government of India for borrowing costs them between 6 to 7 percent.
Hence, some investors are still confused that how Reliance can raise funds at lower rates? Aren’t you? So, here is the answer how Reliance got a chance to raise funds at low rate.
The bonds issued by the Government of India are in Indian Currency, whereas Reliance has issued in dollars. It factors in the Dollar becoming strong in the future compared to the Indian Rupee.
Therefore, the net interest paid will be more or less than the same in the long run. The result will of course be in long run .
The oversubscription of the issue shows how investors are confident about the company. Secondly, the bonds are issued for the tenure of 30 years and 40 years.
So, again, it tells investors’ confidence in the company, and the earning visibility is quite possible for 40 years.