Markets

Reliance Jio raises $500 million in Samurai loan from Japanese banks

MUMBAI: Billionaire Mukesh Ambani-led Reliance Jio has tapped the yield-hungry Japanese loan market to help expand its telecom empire.

The telecom company, owned by Indias richest man, raised $500 million through a syndicated Samurai loan from three Japanese banks, including Bank of Tokyo-Mitsubishi UFJ (MUFG), Sumitomo Mitsui Banking Corporation (SMBC) and Mizuho Bank, two people familiar with the matter told ET. The floating-rate loan is for a seven-year period.

An email sent to Reliance Industries (RIL), the parent company of Jio, remained unanswered until the publication of this report. The Japanese banks involved in the fund-raising could not be contacted immediately.

Loaded with huge cash deposits and shrinking investment options in homeland projects, high-street Japanese banks are chasing bankable debt securities in high-growth overseas markets. Indian Railway Finance Corp. and power utility NTPC were among the other large Indian companies that sought to raise funds through Samurai loans, Bloomberg reported last month.

The average cost of debt, funded through Japanese banks, works out to be among the lowest in international financing markets. Hence, Samurai loans typically help reduce the borrowers weighted average cost of capital. The Jio loan has been priced after adding 65 basis points over the Japanese yen-LIBOR (London Interbank Offered Rate). The LIBOR is a benchmark rate linked to different currencies.

Jio, which raised the loan a few days ago, is seeking to diversify its borrowing base. Entering a new market for borrowing also helps get business in the long run, said one of the persons cited above. The proceeds may be used for the telecom companys expansion.

Last month, RILs board approved raising Rs 20,000 crore through debt in tranches. Analysts said the funds could be used to finance the capital expenditure requirements of Jio, including paying for the wireless assets of Reliance Communications bought under a deal signed late December. Also, RIL is seeking to enhance its contents library.

“Our network continues to rapidly expand across the country. And in the next 12 months, Jio services will cover 99% of our countrys population,” Mukesh Ambani said last year during a speech delivered at the annual general meeting.

Having invested more than Rs 2,00,000 crore and signing up about 175 million subscribers, Jio is also expanding its 4G network rapidly and aims to double its telecom-tower infrastructure to reach the entire population by this year end.

Jios capex needs include about Rs 25,000 crore to be paid to Reliance Communications for wireless assets, including spectrum, towers, optic fibre and switching nodes.

RILs decision to raise funds comes a few days after market leader Bhati Airtel announced its plans to borrow Rs 16,500 crore afresh to refinance existing loans and pay for spectrum.

Jio spent about Rs 7,000 crore as capex in the December quarter and has said it expects capex levels to be similar in the ongoing March quarter.

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