Global Finance Strategy Of RIL

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Global Finance Strategy Of RIL

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  2. 2. Need for a Global Finance Strategy<br />Global Finance Strategies<br />Foreign Funds raised by RIL<br />Long Term Financing Strategies<br />Short Term Financing Strategies<br />Cash Management Strategies<br />Final words about RIL<br />
  3. 3. Reliance exports to 111 countries<br />The percentage of exports in sales as increased over the years from 35% to 61%<br />
  4. 4. Purchases are dominated by foreign imports accounting for nearly 96% of the total value. <br />Value of Purchases has kept on increasing thereby increasing the foreign exchange risk of the company. <br />Crude oil required for refining constitutes a huge portion of imports.<br />
  5. 5. RIL has been investing in expansion. Capital expenditure during the year 08-09 was Rs. 24,713 crore<br />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. <br />With nearly 84% of RIL&apos;s long term debt in foreign currency, RIL was impacted by the 26% depreciation in the value of the rupee against the US dollar. <br />
  6. 6. Hedging<br />Forward / Future Hedging<br />Money Market Hedging<br />Options Hedging<br />Currency Diversification<br />Bonds & Depositaries<br />Yankee Bonds<br />ADR’s and GDR’s<br />Wholly owned subsidiaries on foreign soil<br />
  7. 7. Pre 2003-04<br />In 1996, RIL floated $100 million 50-year Yankee bond in the US markets. First issue of such a long maturity. <br />RIL went on issuing Yankee bonds periodically over the years since then which mitigated risk associated with US currency.<br />2003-04<br />RIL had issued over US$ 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. <br />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. <br />The average final maturity of the Company’s long-term foreign exchange debt is about 10 years. <br />
  8. 8. 2004-05<br />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. <br />2005-06<br />RIL bought back a total of Rs 140 crore of its debentures during the year. <br />It availed US$ 350 million loan (equivalent to Rs 1,519 crore) <br />Issued a Euro Yen Bond of JPY 17.5 billion (equivalent to US$ 150 million / Rs 670 crore) <br />Availed Export Credit Agency (ECA) backed Buyer’s Credit Facility of US$ 114 million and EUR 12 million (equivalent to Rs 559 crore). <br />
  9. 9. 2006-07<br />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. <br />This was followed, in March 2007, by a US$ 150 million deal which was upsized to US$ 250 million.<br />2007-08<br />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. <br />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.<br />
  10. 10. 2008-09<br />RIL raised $1.70 billion by way of syndicated loans<br />$1.25 billion through ECA-backed financing arrangements <br />$100 million equivalent in Japanese Yen through private placement. <br />
  11. 11. RIL uses global markets due to lower interest rates in the developed markets like US, Japan. <br />RIL&apos;s debt as on March 31, 2009 was Rs. 73,904 crore ($ 14.6 billion) with long term foreign currency denominated debt of 84%. <br />RIL uses a portfolio of currencies like yen, pound sterling, euro and dollar for raising long term loans to spread the risk. <br />
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  13. 13. The proportion of short term debt to total debt is conservative at 8.4%. RIL&apos;s liquidity position and committed working capital facilities mitigate any refinancing risk. <br />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.<br />
  14. 14. RIL&apos;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. <br />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. <br />
  15. 15. The strength of RIL&apos;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. <br />RIL meets its working capital requirements through commercial credit lines issued by a consortium of banks. <br />RIL undertakes liability management to reduce overall cost of debt and diversify its liability mix.<br />

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