Reliance Communications Ltd, the mobile telephony arm of the Anil Ambani-led Reliance Group, has raised Rs 4,800 crore from institutional investors through an issue of fresh shares on Tuesday against its original target of Rs 3,000 crore, a person familiar with the development said.
The company will use the proceeds from this qualified institutional placement (QIP) to bring down high-cost rupee debt by around Rs 4,500 crore, said the person who declined to be identified.
RCom’s QIP was met with an enthusiastic response from investors and was subscribed four times the original size of Rs 3,000 crore planned by the company. The total size of the issue stands at Rs 6,100 crore, including the promoters’ planned contribution of Rs 1,300 crore towards subscribing to warrants of the company, convertible into equity shares.
“A large portion of the money raised through the QIP, of around Rs 4,500 crore, will be used to repay high-cost rupee debt and deleverage the company's books while the remaining amount will be used for working capital requirements,” the person quoted earlier said.
“The exercise will lead to interest cost savings of over R800 crore per year.”
Following the exercise, promoter stake in the company will come down from 67% to 60%. RCom had a net debt of Rs 40,178 crore as on March 31, up 3.38% over the previous year.
Around 80% of the contribution to the QIP came from overseas institutional investors including US funds, which only hold long positions in the assets they invest in, this person said.
Typically, asset managers allocate capital on a long-only basis to an asset, which they expect to do well during a bull run.
RCom’s plans to raise funds by monetising assets have run into rough weather in the past.
In July 2012, the company withdrew plans to list its undersea cable business in Singapore and raise $1 billion through an initial public offering, citing unfavourable market conditions. In 2010, RCom announced its intention to sell its telecom tower assets to Mumbai-based GTL Infrastructure, but the deal fell through later that year. Over the last two years, there have been reports of private equity firms like Blackstone and Carlyle evincing interest in RCom’s telecom tower assets, but it didn’t lead to any deal either.
Of late, however, RCom has been able to utilise its assets