Reliance Industries Ltd (RIL), sitting on a huge cash pile of Rs 80,000 crore and having just raised another Rs 4,264 crore as a perpetual bond (perp bond), plans to use the money to repay loans and expand capacity in its petrochemicals, oil and gas and refining businesses.

The Mukesh Ambani-owned company, which has gone on a massive fund raising drive abroad this financial year, is also investing Rs 10,653 crore in Venezuela and another Rs 2,644 crore in its retail business.

IL has not yet officially announced any firm plan for usage of its cash pile, apart from implementing a massive $8-billion expansion of its petrochemical capacity. Insiders say the latest exercise to raise funds from abroad is part of a liability management programme, as repayments of many loans are also coming up in the near future.

“RIL will use these funds to finance its capex programme. The quality of investors reflects RIL’s excellent credit rating and it is among the select issuers from Asia that can access these markets,” says Asit Bhatia, managing director & co-head of investment banking at Bank of America Merrill Lynch.

RIL currently earns higher yield on its cash than the interest outgo on its debt but its return on capital employed has suffered, say analysts. Apart from the perp bond, in this financial year alone, Reliance has already raised close to $4 bn from abroad.

Another worry for Indian companies while raising funds abroad is the foreign exchange risk. With the volatility in the rupee, companies raising funds abroad have to buy forward premium cover, which adds another six per cent to the cost of funds. But as Reliance is earning a substantial portion of its revenue in dollars by way of exports, company insiders say its foreign currency risk gets lower.

For more visit: Business Standard

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