Reliance Jio Infocomm is planning to raise up to Rs 8,000 crore by selling corporate bonds in the local market as early as next week, people with direct knowledge of the matter said.
This is primarily intended to clear a portion of its past dues for purchasing spectrum in the 2014 and 2015 auctions, they said.
The bonds are likely to come in five-year and three-year or two-year tenors.
Jio in talks with top banks, MFs
The Jio bonds are expected to bear interest rates in the range of about 6.2% and 5.35%, people aware of the matter said.
Jio is in talks with a group of lenders, including Axis Bank, ICICI Bank, HDFC Bank and State Bank of India, for the five-year series that aim to raise up to Rs 5,000 crore, the people said.
Top mutual funds have been approached for the papers with two years or three years maturity, which could mop up another Rs 3,000 crore.
Jio may also use a portion of the proceeds to refinance some short-term loans raised earlier through commercial papers. Those are maturing through January, February, and June next year, one of the people said.
Mukesh Ambani-led Jio recently paid Rs 10,792 crore to clear its entire 2016 spectrum dues. It has, however, not yet cleared past dues relating to spectrum purchases in the 2014 and 2015 auctions.
In the 2014 auction, Jio had bought spectrum worth Rs 11,054 crore, of which Rs 3,648 crore was paid upfront. In the 2015 sale, it had bought airwaves worth Rs 10,077 crore, of which Rs 2,695 crore was upfront payment.
After paying annual instalments following a two-year moratorium, Jio’s total balance spectrum dues (including interest) relating to the 2014 and 2015 auctions are estimated at Rs 15,000-16,000 crore, said industry executives aware of details.
Jio is also the sole telecom operator to have refused the government’s recent offer of a four-year moratorium on spectrum and adjusted gross revenue (AGR) payments. The cash-rich company, unlike nearest rivals, especially Vodafone Idea, is not stretched for capital to expand 4G capacity or invest strongly in the upcoming 5G spectrum sale next year and network deployments.
Still, any potential prepayment of past spectrum dues via proceeds raised by bonds “would result in significant interest cost savings for Jio,” said an analyst at a leading brokerage.
It makes business sense for Jio to take the corporate bonds route to clear old spectrum dues as interest rates are much lower – at 5.85-6.00% – compared to the 10% interest that the government charges for deferred spectrum debt repayments, the person added.
Goldman Sachs recently estimated that Jio would gain an extra $1 billion (roughly Rs 7,500 crore) in free cash flows annually following a hike in its prepaid tariffs earlier this month.
Jio had raised prepaid tariffs by 20-21% effective December 1 after Bharti Airtel and Vodafone Idea increased rates in late-November amid efforts to garner more revenue. Mac Pro Tricks