RIL is seeking to raise the funds through external commercial borrowing (ECB) to support its capital expenditure plan. It is in talks with a group of lenders including Barclays, HSBC and MUFG Bank, said people familiar with the matter. The loans, likely for five years, are expected to be priced 130-150 basis points above the Secured Overnight Financing Rate (SOFR), a global rate gauge that replaced the London Interbank Offered Rate (Libor). Bank of America, Citigroup, Credit Agricole, DBS Bank and Mizuho Bank are among others that are in discussions with RIL.
The company doesn’t require prior regulatory approval as the Reserve Bank of India had recently relaxed the rules for ECB of up to $1.5 billion.
RIL and the banks did not comment on the matter.
Jio, on its part, is in talks with the likes of Bank of America, BNP, HSBC and Societe Generale (SocGen) to arrange an offshore syndicated loan to fund 5G network gear buys from Sweden’s Ericsson and Finland’s Nokia, multiple people aware of the matter said.
The overseas loan is likely to be priced after adding an estimated 65 basis points over the Secured Overnight Financing Rate (SOFR), a new global rate gauge, the people added. Going forward, Jio may even upsize the loans as more banks may join the syndication.
The tenor could be in the range of three to seven years.
Separately, two European export credit agencies-EKN and Finnvera-may issue guarantees to the global lenders for extending the offshore loan to Jio, one of the persons cited above told ET.
“The proposed guarantees are expected to boost lenders’ comfort levels as it will reduce funding costs,” the banker said.
Jio, Ericsson, Nokia, EKN and banks did not comment on the matter.
“Finnvera cannot give any information regarding projects we finance, not even tell if a company is our customer or not… this is based on Finnish banking law,” said a spokesman of Finland’s export credit agency in response to ET’s query.
Since the two European export agencies-EKN and Finnvera-are from countries rated two-three notches higher than India’s BBB-sovereign grade, any guarantee from them would be stronger and help manage funding costs better for any borrower, sources said.
Reliance Jio is likely to finalise the process soon as it looks to buy 5G network gear worth around $2.5 billion from the two European vendors. It launched its 5G beta services in Delhi, Mumbai, Kolkata, and Varanasi from October 5 and plans to deliver 5G to every town, taluka and tehsil in India by December 2023.
Parent company RIL, meanwhile, plans to invest Rs 75,000 crore in its oil-to-chemicals business over the next three years to expand capacities in both existing and new value chains, chairman Mukesh Ambani told shareholders at the company’s 45th annual general meeting held on August 29.
In July, the RBI doubled the limit for fundraising via ECB to $1.5 billion under the automatic route on expectations that foreign fund inflows could cushion the rupee’s slide against the dollar. The relaxed regulations are effective till the end of this calendar year.
In August, Housing Development Finance Corp, the country’s largest mortgage lender, raised $1.1 billion via ECB. It offered 90 basis points over the SOFR. Rates have since gone up globally.
Shares of Reliance Industries closed at Rs 2,433.25 on the BSE Friday.