Billionaire Mukesh Ambani's Reliance Industries is set to return to India's rupee bond market after nearly three years, according to reports from The Economic Times. The oil-to-telecom conglomerate plans to raise ₹12,500 crore through a sale of five-year notes, representing what would be the largest single-tranche fundraising by a rated firm since November 2023. The issue is set to invite bids from investors in the week ending September 18, with the notes offering an attractive annual interest rate of 7.47%. As per The Economic Times, the fundraising is valued at $1.32 billion in international terms. The latest reports confirm the offering will be priced at AAA rated notes due in five years at the 7.47% coupon rate, which is significantly lower than the 7.87% average yield on top-rated five-year corporate bonds as of Monday. According to CNBC TV18, the company plans to raise the funds through AAA rated notes due in five years at a coupon of 7.47%, making it the largest listed deal in the market this year.
As reported by The Economic Times, a sharp decline in yields on up to five-year bonds locally has made such funding cheaper than dollar debt sales. The five-year government bond yield has plunged 33 basis points since the start of June, primarily backed by mammoth dollar inflows under the central bank's subsidised schemes. Flows led by those in the non-resident dollar deposit scheme have pulled down local yields, while higher US Treasury rates have lifted the cost of dollar funding for Indian borrowers. According to Business Standard, the bankers confirmed that this yield decline has made rupee debt more attractive than dollar funding for the company. The 7.47% coupon rate on Reliance's offering is notably lower than the current market rates, providing significant value to investors. As per CNBC TV18, the rate is much lower than the 7.87% average yield on top-rated five-year corporate bond ended on Monday. The impact of forex-inflow programs is visible in corporate bond pricing, with five-year AAA PSU corporate bond yields declining from 7.85% on June 3 to 7.68% on September 7, representing a 17 basis points decline.
According to The Economic Times, this would be RIL's first rupee bond offering since November 2023, when it raised ₹20,000 crore in what was the largest local-currency debt sale by an Indian non-financial company. The latest Moneycontrol reports confirm the offer size is ₹100 billion with a greenshoe option to raise another ₹25 billion, bringing the total potential fundraising to ₹12,500 crore. Large private banks are acting as arrangers for the current deal and are also set to partly subscribe to these bonds. Meanwhile, the company is also mulling a 10-year bond issue and is in discussions with bankers and investors for that potential offering. As per CNBC TV18, the bond offering coincides with another major fundraising by the group, as Jio Platforms Ltd. could raise as much as $4 billion in its initial public offering as early as November. Indian companies have borrowed ₹8.9 trillion via domestic bonds so far this year, down about 11% from a year earlier, according to data compiled by Bloomberg. The current market sees other major companies following suit, with Adani Airport Holdings also looking to raise funds through bonds next week, while Larsen & Toubro is considering a ₹500-crore issue.
The bond offering coincides with unprecedented liquidity conditions in the banking sector, driven by record foreign currency inflows. As reported by The Economic Times, banks have mobilised a record $127.2 billion through FCNR(B) deposits under the Reserve Bank of India's special swap facility, with total foreign-currency inflows reaching $136.4 billion by August 31. This influx has created a substantial liquidity surplus in the banking system, with liquidity surplus remaining in the vicinity of around ₹10 lakh crore, with the weighted average call rate trending below the policy repo rate. Banks are now looking to deploy a part of these funds in high-quality corporate credit opportunities. FCNR(B) deposits have been mobilised at around 6-6.25%, giving banks a pool of relatively low-cost funds they can deploy while earning a spread. According to The Economic Times, banks are eager to actively invest as they anticipate potential interest rate hikes, with corporate bonds providing an avenue to put money to work in high-quality credit while protecting their margins amid uncertainty around the interest-rate cycle.
