On Reliance Industry's Borrowings: $ 750 million : Some thoughts on External Borrowings by emerging market companies:

1. As these proceeds are expected  to fund capital expenditure,  the borrowing costs that are attributable to the acquisition or construction of such qualifying assets are to be capitalized as part of the cost of such assets. The  assets may take some  period of time  to pay back on its intended use.  

 (“The notes will rank equally with the company’s other present and future unsecured and unsubordinated obligations. Reliance intends to use the proceeds to fund its ongoing capital expenditure mainly in the refining, and petrochemical sector in India. The company had the same intended use for the proceeds from its recently completed placement of $1 billion 10-year senior unsecured notes,” S&P said in a note on Tuesday."
Read more at: http://www.livemint.com/Companies/70M4JQ1gZn4gSGzdxye2nJ/RIL-taps-overseas-debt-market-again-plans-to-raise-over-50.html?utm_source=copy)

2.      As it appears that the company is using cheap dollar funding to finance the acquisition of domestic assets, does it strengthen or weaken currency mismatches?
3.      How has the company hedged its foreign exchange risk exposures over this long maturity period?
4.      Treasury risks because of these loans include movements in interest rates and foreign exchange rates.
5.      The Group will be  challenged by currently appreciating  dollar. The Company may have to plan for currency funding risk.
6.      Borrowing costs would  include exchange differences arising from foreign currency borrowings. In borrowing in foreign currency, the anxiety is that any rupee depreciation will  negatively impact repayment risk.

• ·         From Reliance Industry Limited Annual Report 2013-2014 :

" Interest cost was higher at Rs 3,206 crore ($ 535 million) (in 2013-14) as against Rs  3,036 crore in FY 2012-13. With majority of the Company’s borrowing in foreign)  currency, sharp rupee depreciation during the year negatively impacted interest costs. This resulted in gross interest cost being higher at Rs  3,907 crore ($ 652 million) as against Rs. 3,421 crore in FY 2012-13."

(http://www.ril.com/rportal1/DownloadLibUploads/1400665256661_AR21052014.pdf)

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