Reliance Jio Eyes $1.5 Bn From Global Lenders To Back 5G Capex

SUMMARY

Jio is also looking to raise an additional $2.5 Bn (around INR 20,600 Cr) from an offshore syndicate to purchase 5G network gear

For the loan, it is in talks with BNP Paribas, HSBC, MUFG Bank, Bank of America, Credit Agricole, DBS Bank and Société Générale, among others

The telecom giant has already committed more than INR 2 Lakh Cr for 5G deployment in the country

Reliance Industries’ wholly-owned subsidiary Reliance Jio Infocomm is reportedly looking to raise $1.5 Bn (~INR 12,350 Cr) in external commercial borrowings.

According to an ET report, the telecom giant is looking to fund its 5G capex and is taking the ECB route after RBI doubled the automatic route limit to $1.5 Bn.

For the loan, it is in talks with BNP Paribas, HSBC, MUFG Bank, Bank of America, Credit Agricole, DBS Bank, Société Générale, among others. The fundraise may be completed by November 2022, the report added.

The current fundraise is also in addition to the $2.5 Bn (~INR 20,600 Cr) offshore syndicate loan that the company intends to raise to purchase 5G network gears from Ericsson and Nokia.

The $1.5 Bn offshore loan is likely to be priced after adding 150-165 basis points over the secured overnight financing rate (SOFR), the report added.

The SOFR has recently replaced the London interbank offered rate (LIOR) and is an interest rate that banks use to price dollar-denominated derivatives and loans, to measure the cost of borrowing an amount of cash collateralised by Treasury securities.

On the other hand, the $2.5 Bn loan will likely carry a five-year tenure and may be priced after adding 130-150 basis points over SOFR. Talks for both loans are undergoing simultaneously.

Reliance Jio On A Fundraising Spree, Again?

Two years ago, the timelines were filled with Reliance Jio’s fundraising activity, as it sought the backing of large investors such as Silver Lake, Facebook, Vista Equity Partners, General Atlantic, KKR, Mubadala, Abu Dhabi Investment Authority, and many more.

It has raised nearly INR 1 Lakh Cr (over $12 Bn) in equity, diluting a 25% stake in the company.

Now, as Reliance Jio gears up for the 5G launch, coupled with the push from the government, it has yet again sought to raise funds, this time, in debt.

In August 2022, the company chairman Mukesh Ambani announced plans to launch 5G networks in Delhi, Mumbai, Chennai and Kolkata by Diwali, and by 2023, in every town of India. It has already launched 5G trials in Mumbai, Delhi, Kolkata and Varanasi.

For this, it has already committed INR 2 Lakh Cr ($24.28 Bn). Reliance Jio bought the rights to use 24,740 MHz of 5G spectrum for 20 years for a total price of INR 88,078 Cr.

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