2. Need for a Global Finance Strategy Global Finance Strategies Foreign Funds raised by RIL Long Term Financing Strategies Short Term Financing Strategies Cash Management Strategies Final words about RIL
3. Reliance exports to 111 countries The percentage of exports in sales as increased over the years from 35% to 61%
4. Purchases are dominated by foreign imports accounting for nearly 96% of the total value. Value of Purchases has kept on increasing thereby increasing the foreign exchange risk of the company. Crude oil required for refining constitutes a huge portion of imports.
5. RIL has been investing in expansion. Capital expenditure during the year 08-09 was Rs. 24,713 crore In 2008-09, interest cost of RIL was higher by 62% on account of higher borrowings and the impact of depreciation in the value of the rupee against the US dollar. With nearly 84% of RIL's long term debt in foreign currency, RIL was impacted by the 26% depreciation in the value of the rupee against the US dollar.
7. Pre 2003-04 In 1996, RIL floated $100 million 50-year Yankee bond in the US markets. First issue of such a long maturity. RIL went on issuing Yankee bonds periodically over the years since then which mitigated risk associated with US currency. 2003-04 RIL had issued over US$ 1.3 billion (Rs. 6,000 crore) of debt securities in international capital markets since 1996, with maturities ranging from 7 years to 100 years. RIL has so far bought back and cancelled US$ 744 million (Rs. 3,532 crore) of its bonds, which represents about 57 per cent of the total issued. The average final maturity of the Company’s long-term foreign exchange debt is about 10 years.
8. 2004-05 RIL availed a US$ 350 million loan (Rs 1,527 crore) and signed a EUR 116.2 million Export Credit Agency (ECA) backed Buyer’s credit facility for project financing. 2005-06 RIL bought back a total of Rs 140 crore of its debentures during the year. It availed US$ 350 million loan (equivalent to Rs 1,519 crore) Issued a Euro Yen Bond of JPY 17.5 billion (equivalent to US$ 150 million / Rs 670 crore) Availed Export Credit Agency (ECA) backed Buyer’s Credit Facility of US$ 114 million and EUR 12 million (equivalent to Rs 559 crore).
9. 2006-07 RIL funded the first ever debt issuance in the US private placement market by an Indian Company by launching a US$ 200 million issue which was increased to US$ 300 million owing to oversubscription. This was followed, in March 2007, by a US$ 150 million deal which was upsized to US$ 250 million. 2007-08 RIL set a new benchmark in Asia by raising a $ 2 billion syndicated term loan for a 10-year period with participation from 23 banks across the globe. This is a landmark deal as it makes RIL the first corporate borrower from India to have accessed the External Commercial Borrowings (ECB) market for this size. In September 2007 the Company also raised $ 500 million by way of a syndicated term loan at competitive rates amidst the subprime turmoil in the global markets.
10. 2008-09 RIL raised $1.70 billion by way of syndicated loans $1.25 billion through ECA-backed financing arrangements $100 million equivalent in Japanese Yen through private placement.
11. RIL uses global markets due to lower interest rates in the developed markets like US, Japan. RIL's debt as on March 31, 2009 was Rs. 73,904 crore ($ 14.6 billion) with long term foreign currency denominated debt of 84%. RIL uses a portfolio of currencies like yen, pound sterling, euro and dollar for raising long term loans to spread the risk.
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13. The proportion of short term debt to total debt is conservative at 8.4%. RIL's liquidity position and committed working capital facilities mitigate any refinancing risk. The company has adopted a strategy of using foreign loans for working capital purposes to procure raw-material in foreign exchange. The company uses its export earnings and foreign exchange assets to hedge against foreign exchange risk.
14. RIL's cash and cash equivalents as at the year-end of 08-09 amounted to Rs. 25,050 crore ($ 4.9 billion). These are placed in bank fixed deposits, CDs, Government securities and bonds. RIL has preferred to diversify cash among different banks in the world to hedge against loss due to foreign exchange fluctuations. It has imposed a limit to its exposure to each currency by imposing a limit to the cash invested in each account.
15. The strength of RIL's balance sheet, credit profile and earning capability is reflected in the fact that over 100 banks and financial institutions have financial commitments to the Company. RIL meets its working capital requirements through commercial credit lines issued by a consortium of banks. RIL undertakes liability management to reduce overall cost of debt and diversify its liability mix.
