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Reliance Petroleum restructures loan portfolio - Views on News from Equitymaster
 
 
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  • Aug 20, 1999

    Reliance Petroleum restructures loan portfolio

    According to newspaper reports, Reliance Petroleum Limited (RPL) has substituted $170.5 m of its $300 m external commercial borrowings (ECBs) with rupee borrowings of Rs 8 bn.

    RPL has set up the world's largest single location refinery having a capacity of 27 mn tpa, at a cost of Rs 142.5 bn.

    RPL, which has completed its borrowing program for funding the refinery, has been restructuring its loan portfolio to benefit from the lower domestic rates of interest. In substituting the ECBs for domestic debt RPL also avoids the risk of exchange loss, which is uncertain at the time of contracting such loans. Therefore, the move to switch debt must be seen in positive light especially in view of the depreciation in the value of the rupee.

    The strong likelihood that the Reserve Bank of India will stimulate a lower interest regime in the forthcoming months will further benefit RPL in terms of lower interest costs.

    Market View:
    RPL's advantage of size, product mix and marketing ability has led the analysts to rate the stock as a 'BUY'. The product mix is in favor of light distillate, LPG and diesel, all of which have high demand growth. The company plans to market a third of its production to group companies, thus providing it with a ready market.

     

     

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