Reliance Industries Limited: Case Study: Reliance Industries Limited

Reliance Industries Limited (RIL) is an Indian conglomerate headquartered in Mumbai, Maharashtra. It is owned by Mr. Mukesh Ambani, one of the business tycoons of INDIA. It is a publicly traded company. It is India’s first private sector company to feature in Fortune Global 500 list of “World’s Largest Corporations”, currently ranking in 114th in terms of revenue and 155th in terms of profit and continues to be featured for the 11th consecutive year. RIL ranks 194th in the Financial Times’ FT Global 500 2014 list of the world’s largest companies. RIL is India’s greenest and most environment friendly company, ranking 185th among the world’s largest 500 companies, according to Newsweek’s Green Ranking 2014. The company has grown tremendously

The issue is oversubscribed seven times, strengthening Reliance’s growth ambitions. Later Reliance sets up a mill in Naroda, Gujarat, sparking off Reliance’s backward integration journey. The flagship brand was “Vimal”. Many Bollywood stars endorsed the brand and many stores opened as “Only Vimal” stores. In 2000, Reliance commissions the world's largest grassroots refinery in a record 36 months: the Jamnagar petrochemicals and integrated refinery complex. In 2002, Reliance enters the Infocomm business and brings about a revolution in mobile telephony in India. In 2009, Reliance commences production of hydrocarbons in its KGD6 block - against all odds. Reliance Retail becomes the largest retailer by revenue in 2014, fulfilling the aspirations of millions across the country and bringing international experiences at affordable prices to every corner of India. Reliance Jio Infocomm Ltd., ushers in a pan-India digital revolution through state-of-the-art wireless broadband 4G services, promising to bridge the digital divide. Creating a huge empire requires investments. Any single Indian bank could not fund the project which Reliance

The coupon rate was 5.875 which was low as compared to other companies who issued similar bonds at 6 percent. Indian bond yields were more than 8%. Perpetual issuance in Asia nearly doubled, to $10.5bn from $5.8bn in 2011. The bond yield was 5.875 per cent compared with 5.25 per cent for the company’s 30-year bonds, and was around four times oversubscribed with almost $3bn in orders. This issue has a call option to buy back the debt in the fifth year, apart from a similar option before every interest payment. Moody’s rated this bond at BAA2, equal to company’s existing foreign currency debt.

In Feb 2014, they raised another $750 through 30 year bond issue through international investors. The yield was 4.875%.This was used for the company’s expansion spree. In mid 2014, they raised another $350 million from overseas market mainly to refinance debt raised by Standard Chartered.

Reliance Jio and petrochemicals investment is funded through these overseas borrowings. Total foreign borrowings stand at more than $10 bn. Reliance Jio alone requires an investment of $11.7 bn. Petrochemical capacity will expand by 60% by 2017. This requires $30 billion investment over the next 3 yrs.

In Jan 2015, Reliance Industries raises $1 billion from bond sale in US markets. Funds were raised at a cost of 240 bps over benchmark 10-year US treasury bonds, which works out to a coupon rate of