Reliance Industries’ upcoming bond problem, touted to be the second-biggest for an Indian agency, will see sturdy demand from insurers, with aggressive bidding enabling the conglomerate to borrow at charges that simply high the sovereign yield, a number of service provider bankers mentioned.
The billionaire Mukesh Ambani-led firm goals to boost as much as ₹200 billion through 10-year bonds on Thursday, its first such fundraise since May 2020.
“There is demand from long-term investors like insurance and pension funds. There has been a limited number of corporate bonds issuance in longer tenor in the last two quarters, so, this RIL issue comes at an opportune time,” mentioned Badrish Kulhalli, head of fastened revenue at HDFC Life Insurance.
In February, HDFC raised ₹250 billion through 10-year bonds at 7.97% coupon, making it the most important bond problem by an Indian firm.
“Reliance’s longer-tenor bond issue is very attractive and we expect around 50%-70% of the issue size to be taken up by LIC, and another 10%-20% by a state-run provident fund house,” a banker conscious of the event mentioned.
Reliance and LIC didn’t reply to Reuters emails looking for remark.
The firm is more likely to obtain bids within the vary of seven.70%-7.80%, round 30-40 foundation factors (bps) above the 10-year benchmark authorities bond yield on an annualised foundation, merchants mentioned, including they count on over-subscription.
The unfold towards the 10-year benchmark bond yield for the HDFC problem was round 50 bps.
Reliance’s bonds, rated AAA by CRISIL, are partly paid the place the 50% of the difficulty measurement will be paid on allotment day, which is Friday and the remaining 50% on Dec 15.
“The partly paid debenture structure, with staggered redemption, suits mainly insurance companies,” mentioned Venkatakrishnan Srinivasan, founder and managing companion at Rockfort Fincap.
A scarcity of enough provide of long term bonds from personal firms will additionally assist Reliance, the bankers mentioned.
Reliance has mentioned it will use proceeds from the difficulty to refinance current borrowings, on capex and in investments on home subsidiaries the place it has a majority stake.
