Reliance Industries Limited has obtained an amount of $200 million after it sold itslong-term bonds. The bonds were sold to investors in Taiwan. Completion of such a sale makes Reliance Industries, the first company to do so.
Formosa bonds
Bonds that are issued in Taiwan and are not in the New Taiwan Dollar, are termed as Formosa bonds. The market of these bonds is fast growing as it provides funds for a longer period and may be invested with insurers in Taiwan. Reliance Industries is the first company of Asia that has captured this market.
Reliance Industries gave a notice to the exchanges yesterday. It mentioned that the company had obtained the money by issuing 20-year notes with coupon rate of 5%.
The company informed, “These notes, denominated in US dollars, have been issued primarily to Taiwanese life insurance companies and are proposed to be listed on the Taipei Exchange.” It also said that the money will be used for its ongoing capital expenditure.
The issue was managed by renowned banks, namely Deutsche Bank AG, HSBC Bank (Taiwan) Ltd. andTaipei Branch.
A banker said that many companies are tapping the Formosa bond market. It is because in this market, the issuer may make use of very long-dated bond financing and redeem it even before it is matured.
Randhir Singh, India Head of Financing at Deutsche Banksaid that, this Formosa bond is the first which is not based in India. He also said that the bond issued by Reliance Industries has the longest tenureamong any such bond issued by any Asian company.
Reliance Industries is an active foreign currency borrower. The company plans to expand its petrochemical business and roll out its 4G (fourth generation) telecom services. It is planning to expand its petrochemical business by 60% in 2 years.
Preparations for telecom venture
In this month, Reliance Industries’ subsidiary, Reliance Jio Infocomm Limited acquired $750 million from an associationof nine banks.Korea Trade Insurance Corporation (K-Sure) acted as the guarantor of this loan. Reliance Industries also took $1 billion after selling 10-year bonds, in January. Investors from Asia, Europe and US bought these bonds.
In the last three years, the company has acquired more than $10 billion from out of India borrowings. A major portion of this amount is used for setting up its telecom infrastructure.
The company is gearing up to establish a telecom network spread throughout the country. It wants to offer communication service and internet connection with high-speed. Besides, it also focuses on giving other digital services in sectors like education, entertainment, healthcare, government-citizen interface, security and financial services.
To set up the infrastructure the company has already invested more than $14 billion. It has also planned to roll out its voice services in a minimum of five cities before the end of next month. The company has a license to offer 4G services all over the country in 22 circles under the spectrum band of 2,300MHz. Besides, it has also won 20 telecom regions in spectrum bands of 800MHz and 1800MHz.
Summary
Being the first Indian company, to sell its long-term Taiwan bonds, Reliance Industries has raised $200 million.