Bonds: Cash-rich RIL redeems local bonds worth Rs 4,000 crore

Mumbai: (RIL) bought around ₹4,000 crore of local bonds from existing investors for two consecutive days last week, demonstrating the strength of the cash position of the telecom oil company which dominates all its Indian rivals on conventional financial parameters.

Several people with knowledge of the bond buyback program told ET that the move helped pay off high-cost debt. The three-year securities would have offered coupons in the range of 6.95 to 7.20%. Some of the bond sellers were mutual funds managed by IDFC, Aditya Birla, SBI, DSP and Invesco.

The buyouts follow a record fundraising by India’s biggest company in overseas markets about three weeks ago.

Reliance Industries and individual bond investors did not respond to ET’s questions.

“The company has made an open offer to all market participants, both directly and through brokers,” one of the people quoted above told ET.

These shorter duration bonds were sold at different yield levels. At least four series of paper maturing in March, April, May and September 2023 were redeemed at yields of 4.82%, 4.95%, 5% and 5.10%, respectively.

Reliance reportedly redeemed a total of bonds worth up to ₹4,000 crore on Thursday and Friday, sources said. It also extended offers to other fund houses that would respond to Reliance’s proposals on the basis of commensurate returns.

“We can evaluate such a proposal if the offer is reasonable,” said a fund manager who received such an offer.

The interest rate cycle turns around with the rise in market rates. Although the Reserve Bank of India (RBI) has not hinted at an imminent change in its monetary policy, central banks around the world are unwinding liquidity, driving yields higher. The benchmark US Treasury index has jumped 27 basis points this calendar year amid speculation of faster-than-expected rate hikes by the US Federal Reserve.

At home, benchmark paper also rose 17 basis points to 6.62% amid falling levels of excess liquidity in the banking system.

“RIL bonds enjoy a scarcity premium in the market as existing investors will only sell when they are sufficiently rewarded, either through yields or reissues,” said Ajay Manglunia, managing director of JM Financial. .

“As rates have started to rise, companies are looking to restructure their existing debt at high cost,” he said.

RIL bonds are liquid securities rated triple A in an otherwise shallow corporate bond market.

A total of ₹6,110 crore of RIL bonds changed hands on Thursday and Friday collectively, data compiled by JM Financial shows. The majority came from repurchase agreements, dealers said.

Garland K. Long