Even as experts foresaw a slew of benefits flowing to India Inc after Moody’s upgraded India’s sovereign credit rating to Baa2 from Baa3 on Friday, Indian conglomerates, including Mukesh Ambani-led Reliance Industries, have already reaped tangible benefits. Notably, India’s most valued company Reliance Industries’ bond issue to raise up to $800 million hit the market a day after India’s local and foreign currency issuer rating was upgraded. Due to the timing, Reliance Industries priced the dollar-denominated bonds at just 130 basis points over the 10-year US treasury yield. The bond was earlier pegged to be priced at 150 basis points over the 10-year US treasury yield, bankers close to the deal told the Financial Express. The tighter spread will save RIL a lot of money in interest payments, as this is the lowest coupon at which an Indian company ever raised capital for a 10-year issuance.
In a press release by the company, Reliance Industries said that this issue has achieved the “Tightest ever spread over US Treasury for an Indian entity for a 10 year issuance.” Further, the issue also made news for being the tightest ever spread over US Treasury for a 10 year BBB corporate issuance from Asia ex-Japan since global financial crisis.
“The deal has seen considerable interest from investors so far. It has been a while since an investment grade dollar bond from India has hit the market and therefore we could see substantial interest from US investors as well,” the newspaper quoted a source as saying.
The rating agency Moody’s assigned a Baa2 rating to the proposed unsecured bond sale by RIL. “The bonds will rank pari passu with RIL’s other existing and future unsecured and unsubordinated obligations,” the rating firm said assigning the Baa2 rating.
Apart from RIL, Jet Airways is also slated to benefit from the upgrade. In an interview with CNBC-TV18, Amit Agarwal, CFO of the Jet Airways said, “Going forward, as you can understand, the upgrade of Moody’s rating is also going to help us for sale and leaseback, in terms of the various aircrafts which we are going to get.” In the same interview, Amit Agarwal said that the company will be able to reduce its financing costs due to the upgrade.
“ With the Moody’s upgrade, the new fleet which we are going to buy, the 75 firm orders which we have placed, the aircraft deliveries will start from June-18. We are not taking a debt on balance sheet, rather it will be sale-and lease-back. After this upgrade, all the lessors will expect reasonable returns, and we expect a reduction in our financing cost costs,” he told the channel. Amit Agarwal said, “Jet Airways for the last two-and-a-half years has been focused on the cost reduction drive,” adding that currently the debt in the books stands at Rs 8,000 crore.
