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Reliance Industries Limited (RIL) has once again shown its strength. India's largest company has taken a loan of $3 billion from a consortium of 11 banks. According to a report in The Economic Times, this is the company's largest loan deal in the last two years.
This five-year loan was finalized last month. The interest rate on this is 120 basis points higher than SOFR (Secured Overnight Financing Rate). Out of this, $450 million has been taken in Japanese Yen.
Now you must be wondering, why did they take such a big loan? Actually, Reliance has to repay some of its big debts in 2025. According to the report, the company has already used $700 million from this loan. The remaining funds will be used as per the need in this quarter.
What is the loan interest?
The three-month SOFR was around 4.80% in mid-December. Adding 120 basis points to this brings it to around 6%. The interest rate on the Japanese Yen portion is 75 basis points higher than TIBOR (Tokyo Interbank Offer Rate).
Which banks are with you?
The biggest contributor to the deal is Bank of America, which has provided a loan of $343 million. It is followed by DBS Bank and HSBC with $300 million, Japan's MUFG Bank with $280 million and State Bank of India with $275 million.
In addition, Standard Chartered, Mizuho Bank and SMBC have committed $250 million. First Abu Dhabi Bank, Citibank and Credit Agricole CIB have committed $241 million.
This is not the first time Reliance has taken such a big step. In 2022 too, the company had taken a loan of $3 billion under dual-currency (dollar and yen) loan. Later it was increased to $5 billion.
What is the strength of Reliance?
Reliance Industries has a BBB+ rating from S&P, which is better than India's sovereign rating (BBB-). This makes the company extremely attractive to global investors.
