Reliance Comm seeks $11 billion debt war chest
The Anil Ambani-promoted Reliance Communications has sought to hike its borrowing limit to three times its equity capital and reserves – roughly an additional Rs 45,000 crore ($11 billion). The resolution will be placed before its shareholders on July 17. A dividend of 10 per cent has also been proposed.
The company is expanding its network to 22,000 towns by the end of 2007 and has just announced $600 million of network contracts for Alcatel-Lucent and Huwaei. The company says this expansion is the largest ever network expansion anywhere in the world.
The Reliance Communications board currently has the mandate to borrow Rs 10,000 crore in excess of its issued and paid-up equity capital and reserves. The reserves and capital are slightly more than Rs 20,000 crore at present, and therefore currently the board can borrow around Rs 30,000 crore.
The new resolution will raise the borrowing limit to around Rs 60,000 crore as long as the capital and reserves remain at the current level. With increase in reserves, through profits, every year the borrowing limit will keep moving up.
According to the annual report of the company, it had a total debt of around Rs 14,567 crore. This allows the company to borrow another Rs 45,000 crore with the current capital structure in place. Any infusion would raise the borrowing limit by three times.
The company had raised $1.5 billion (Rs 6,630 crore) through foreign currency convertible bonds in two tranches in March 2006 and February 2007.
The conversion of these bonds to equity will immediately free up more borrowing for the company.
The company at present has Rs 5,113 crore of secured loans and another Rs 9,454 crore worth of unsecured loans. The foreign currency loans are around Rs 1,937 crore.