Reliance Industries (RIL), India's most profitable company, is looking at refinancing Rs 10,000 crore worth of non-convertible debentures (NCDs) maturing in this financial year, and a portion of high cost loans with private placement of new NCDs, sources in the know told BusinessToday.In. The move will help the company to reduce the cost of debts, especially in a low interest rate scenario.
"Until March 2019, RIL had issued secured NCDs of Rs 500 crore and unsecured NCDs of Rs 37,000 crore. Of that, the secured NCDs of Rs 500 crore and Rs 10,000 crore of unsecured NCDs will become mature in FY2020/21. RIL has unsecured term loans worth Rs 47,926 crore maturing between April 2020 and March 2025," said sources in the know. The secured NCDs have a interest rate of nearly nine per cent, while unsecured has around seven per cent. RIL issued NCDs aggregating to Rs 19,000 crore in the Indian capital markets in 2018-19.
The board of RIL on Thursday approved a proposal to raise up to Rs 25,000 crore through NCDs in tranches, on a private placement basis. The petroleum-to-telecom company had net debt of Rs 1.53 lakh crore in December 2019.
Chairman Mukesh Ambani plans to cut down its net debt to zero by March 2021. The company was largely depending on strategic investments such as the one from Saudi Aramco to reduce debt. But the spread of coronavirus and oil price crash has narrowed the scope of selling stake at its peak valuation as RIL stock has fallen 28 per cent since mid-February to under Rs 1,100.
RIL has over the last few years executed the largest investment cycle in history-- investing Rs 5.4 lakh crore in five years until 2019. During FY 2018-19, it tied up new financing as well as refinanced its existing loans as part of an on-going liability management exercise. The company had a cash flow of around Rs 90,000 crore in the last financial year.
According to RIL annual report, it is focused on liquidity and maintains a robust cash position to ensure that there is adequate cover to respond to potential short term market dislocation. Cash generated through operating activities remains the primary source for liquidity along with undrawn borrowing facilities and levels of cash and cash equivalents.
RIL actively explores opportunities to optimise the cost of borrowing and aligns the maturity profile of its existing debt portfolio with its business strategy, it says. As part of its liability management exercise, during FY 2018-19, RIL refinanced long-term financing of $2.7 billion syndicated term loan facilities. It lengthened the maturity of its long-term debt portfolio through this refinancing exercise.