Reliance Jio to raise $750 million via offshore loans

Reliance Jio, the digital and telecom arm of the Reliance group, plans to raise close to $750 million (approximately Rs.5,700 crore). These funds will be raised via an offshore syndicated loan through a consortium of banks that will underwrite the entire loan jointly.

The purpose of this offshore fund raising is intended to primarily fund future capex needs. With the big shift to 5G likely to happen and accelerate in next 3 years, Jio needs huge funds.

A total of seven banks will constitute the lending syndicate for this offshore loan facility for Reliance Jio. The consortium of banks includes Bank of America, Credit Agricole, HSBC and State Bank of India.

In addition, 3 Japanese banks will also join the lending consortium viz. MUFG, Mizuho Bank and SMBC. The loan will be a 5-year offshore loan facility. It is likely to be priced at a spread of 120-130 bps above the Secured Overnight Financing Rate (SOFR).

While the banks and the company have been cagey about revealing any further details, what is known is the quantum of the loan, the coupon spread and the tenure. The $750 million offshore lending facility will be priced at 120 - 130 bps above the SOFR and will have a tenure of 5 years.

The agreement for the loan is expected to be signed between Reliance Industries and the consortium of banks in the current week itself.
 

It may be recollected that two months back, Reliance Jio had raised around $1.1 billion via corporate bonds in the domestic bond markets. This was principally meant to clear the past dues pertaining to spectrum purchases in 2014 and 2015 auctions.

The current offshore loan facility will be important for Jio in the sense that it would underline and also enhance the global investor confidence in India’s largest telecom cum digital play.
 
It is anticipated that a part of the funds raised through the offshore loan facility was likely to be used for capital expenditure pertaining to bankrolling the first wave of 5G network rollouts. This is likely to be highly capital intensive and a low cost international loan would be the best fit.

However, Jio was also likely to refinance some of its short-term bridge loans raised earlier through commercial papers and other short term instruments.

The government is counting heavily on the early launch of 5G rollouts in the current fiscal year. The telecom regulator (TRAI) has been asked by the government to send its 5G spectrum pricing recommendations by March-end.

The government is keen to hold the sale of spectrum in May 2022 and have the initial 5G rollouts by August 15th this year. While Jio will be aggressive in 5G spectrum, it would also keep an eye on Bharti and Vodafone, since both companies have been making aggressive moves in the 4G spectrum arena.