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Reliance Info to get Rs 5,000 crore more

Savio G Pinto & S Ravindran in Mumbai

With the date of the launch of its infocom project fast approaching, Reliance Industries is infusing an additional Rs 5,000 crore (Rs 50 billion) into Reliance Infocomm, its flagship for the information-communication business.

Reliance Industries is a 45 per cent shareholder in the Rs 25,000 crore (Rs 250 billion) infocom project and the project is expected to have a debt-equity ratio of one.

With the equity component being in the region of Rs 12,000 crore (Rs 120 billion), Reliance Industries' equity contribution will be close to Rs 5,000 crore (Rs 50 billion).

However, the money to be infused into Reliance Infocomm will be debt in the form of non-convertible debentures bearing an interest rate of 9-10 per cent, according to sources.

This is because the equity of Reliance Infocomm, which currently stands at Rs 31.5 crore (Rs 315 million), is yet to be firmed up pending investment decisions by other partners in the project. The funds are to be infused within the next three to four months.

According to an analyst, "In the telecommunications business, the bulk of the money is at the consumer-end, as against a refinery business where 80 per cent of the funds are used up prior to the date of commercial production."

"The requirement of funds in the telecommunications business is telescoped in the three months immediately following the launch. That is because equipment like handsets are usually bought on the basis of a letter of credit, with liberal payment terms. So these letters of credit usually mature 3-4 months after the launch and that is when the money is required," another analyst said.

Reliance Industries is the lead investor in the groups initiatives in the infocom sector.

Reliance Infocomm is building a world-class broadband, Internet protocol backbone, connecting Indias top 115 cities with over 60,000 kilometres of fibre. The company also holds licences for providing basic telephone services in 18 states.

BSES, Reliance in talks on telecom

Power major BSES and Reliance Infocomm are in talks for tapping their synergies in the telecommunications sector.

BSES's telecommunications operations are routed through the wholly-owned subsidiary, BSES Telecom.

The Reliance group is the largest shareholder in BSES with a stake of 42.3 per cent.

Confirming the development, a senior BSES executive told Business Standard, "BSES Telecom and Reliance Infocomm are in discussions to see how well the two companies can cooperate."

However, the executive refused to spell out the details.

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