Aug 27, 1999|
RPL prepays high cost rupee debt
According to newspaper reports, Reliance Petroleum Limited (RPL) has prepaid debt amounting to Rs 5 bn. The debt repayment is a part of the company's strategy to swap existing debt for lower cost debt.
RPL has set up the world's largest single location refinery having a capacity of 27 m tonnes per annum, at a cost of Rs 142.5 bn.
The repayment of the Rs 5 bn debt, which had been raised from Industrial Finance Corporation of India, will result in substantial cost savings. According to one estimate the savings will amount to Rs 1.25 bn over the entire life of the loan.
RPL plans to capitalise on the lower interest rates prevailing in the Indian economy. It has been aggressively swapping its dollar denominated and high cost rupee debt for cheaper rupee debt. Also, with the outlook for the value of the Indian Rupee not too favourable, RPL will have avoided substantial costs, which it would have to otherwise incur on account of rupee depreciation. The move will significantly boost the bottomline of the company in the coming years.
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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