Reliance raises $4 bn via foreign currency bonds at finest rate

India Inc’s overseas fundraising at the start of 2022 began on a strong note with Reliance Industries mopping up $4 billion through debt, the largest-ever foreign currency bonds issuance by an Indian entity. Reflecting strong momentum, some Indian companies like Shriram Transport Finance and unit of ReNew Power are already in the international market and others have bond offerings in pipeline to raise upto $7 billion-$8 billion in January 2022.

RIL issue was nearly three times oversubscribed with a peak order book aggregating $11.5 billion and was priced through RIL's secondary curve. The firm raised $1.5 billion at a coupon rate of 2.875 per cent, $1.75 billion at 3.625 per cent and $750 million at 3.75 per cent. The notes are due for repayment between 2032 and 2062.

The Notes have been priced at 120 basis points, 160 basis points and 170 basis points over the respective US Treasuries benchmark, RIL said.

The Notes are rated BBB+ by S&P and Baa2 by Moody's.

Merchant bankers and issue arrangers said the Mukesh-Ambani led entity has raised funds at cheapest rate and created benchmark for pricing as well as tenure. The 40-year paper by RIL shows the global market is gradually opening to give very long tenor funds to those Indian firms with robust balance sheets, business profile and strong plans in upcoming areas like renewable energy.

This transaction is significant on various counts - largest-ever foreign currency bond issuance from India, tightest ever implied credit spread over the respective US Treasury across each of the 3 tranches by an Indian Corporate. It got the lowest coupon for benchmark 30-year and 40-year issuances by a private sector BBB corporate from Asia ex-Japan, and first-ever 40-year tranche by a BBB private sector corporate from Asia ex-Japan, RIL said in a statement.

P D Singh, Managing Director, Head Corporate Banking India, JPMorgan Chase said Reliance has large scale operations with market leadership, long term sustainable business model, and robust financial strength.

The company has been an infrequent issuer (Reliance came to US$ bond markets in 2017). This scarcity value also added to the significant interest from all classes of investors including insurance & pension funds – which added to the fine pricing and demand for long tenors, Singh added.

Meanwhile, transport financier Shriram Transport Finance is raising about $500 million and India Clean Energy Holdings, an unit of Sumant Sinha-led ReNew Power, is also expected to raise benchmark size (over $300 million), market sources said.

The proposed notes' proceeds would be on-lent to ReNew by way of a US-dollar external commercial borrowing (ECB) bond, with a back-to-back structure and cross-default provisions.

The ECB's tenure is intended to be longer than that of the proposed notes, providing ReNew flexibility to refinance the proposed notes without unwinding the entire structure.

Bankers said Anil Agarwal led Vedanta is looking at bond offering which could be $ one billion this month. Also, Mumbai International Airports Ltd (MIAL), a Adani group entity, may be in the market with benchmark size offering ($300 million-$500 million). Many Adani group entities in energy and power business have raised money from the international market in calendar 2021.

While Omicron cases cast shadow on near term and market rates may harden on taper, the economic recovery in India is seen on strong footing. This creates a strong appetite for Indian paper. Indian entities have raised over $20 billion from the overseas bond market in 2021.

Hardik Dalal, managing director and head of loans and bonds, Barclays Bank India said overseas fund raising through bonds could come close to $10 billion in the first quarter (January-March 2021). The loans through external commercial borrowings will be separate activity.