Mumbai: Reliance Industries (RELI.NS) plans to issue a $1 billion 10-year overseas bond, probably early next year, to fund capital spending and possible acquisitions, three sources with direct knowledge said on Wednesday.
Reliance, the largest listed Indian conglomerate, has hired Citigroup (C.N), Bank of America-Merrill Lynch (BAC.N) and UBS AG (UBSN.VX) for the issue, according to the sources who declined to be named as the information is not public yet.
Two other global banks are also likely to join the list of bankers for the issue, one of the sources said. The terms of bond have not yet been decided, the sources said.
The sources said Reliance would use the funds to boost operations at its two refineries in western Gujarat state.
A Mumbai-based spokesman for Reliance Industries, which the market values at nearly $49 billion, had no comment when reached. All the three banks also declined to comment.
The Economic Times newspaper reported on Wednesday Reliance planned to raise funds with an interest rate of 2.25-2.50 per cent, about 125-150 basis points above the benchmark London Interbank Offered Rate (LIBOR).
The sources said Reliance would use the funds to boost operations at its two refineries in western Gujarat state, which account for about a third of India's refining capacity, and for possible acquisition of overseas energy assets.
Part of the proceeds could also be used to repay some existing debt, one of the sources said.
Reliance, controlled by Indian billionaire Mukesh Ambani, the country's richest man with reported wealth of $22.6 billion, has interests in refining, oil and gas exploration, petrochemicals and retail.
The company has been looking to expand into telecom and financial services.
Reliance raised $1.5 billion ib bonds in October last year in a two-part deal - a $1 billion 10-year tranche and another $500 million, 30-year bond issue.
It also completed a $1.091 billion, five-year term loan from foreign investors in August, its third syndicated facility in nine months.
Shares in Reliance, which has the highest weighting in the benchmark market index, ended up 1.7 per cent at 778.25 rupees, after having risen as much as 2.4 per cent during the day, in a main Mumbai market .BSESN that rose 0.7 per cent.
Indian issuers of overseas bonds have been kept on the sidelines in the last few months by volatile global markets.
A slew of companies had announced plans, mandated banks or completed investor meetings for possible overseas issues, but the offerings were put on hold.
Indian borrowers are especially price-sensitive and are reluctant to bring transactions in volatile markets that could upset pricing expectations.
Indian companies raised $6.6 billion in US dollar bonds overseas in the first half of 2011, compared with $2.6 billion in the same period a year earlier, attracted in part by lower yields overseas.