Mukesh Ambani’s spending spree paying off as bond risk slides for RIL

Mumbai: Bond risk for billionaire Mukesh Ambani’s Reliance Industries Ltd is falling for the first time in four quarters as it gets ready to start a fourth-generation (4G) mobile phone network and to make more synthetic materials.

Contracts that protect debt in India’s second-biggest company by value against non-payment have fallen 22 basis points from an eight-month high of 206 on 25 August, according to data provider CMA. That compares with a 14 basis point drop in credit-default swaps on State Bank of India (SBI), considered a proxy for the sovereign.

Fitch Ratings Ltd sees earnings getting a boost almost from day one from Reliance’s expansion in polymers used for textiles and packaging and predicts it will be among the top five players in offering 4G services. Profit in the June quarter was the highest in seven-and-a-half years as lower oil costs increased earnings from the world’s biggest oil refinery complex.

“Profitability will improve with the commissioning of some of petrochemical units in 2015,” said Tahera Kachwalla, Singapore-based analyst at the rating company. “RIL has invested heavily in its telecom division, and we expect it to be among the top five players in the business in India.”

Reliance is investing $17 billion to boost its petrochemicals capacity and build facilities to import ethane from the US, securing low-cost feedstock for polymer resins such as those used to make clothing and containers. The firm in July said it has spent more than 70% of the planned expenditure for the project that will get fully commissioned in two years.

Reliance Industries Limited (RIL)