Explain the move of Reliance Jio of raising Rs 5,000 crore through bonds?

Every telecom company in India is gearing up to launch 5G services and is looking towards increasing its current cash flow. Billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd., which is India’s largest telecom company, is also looking to raise a staggering Rs 5,000 crores ($671 million) through its biggest ever rupee bond sale. This fundraising is a part of Reliance Industries' plans to raise a total of $5 billion in unsecured dollar bonds over multiple tranches to refinance existing borrowings.

Jio will raise the Rs 5,000 crores through 5-year bonds at a coupon of 6.20% at less than 50 basis points. Before this, Jio raised money in the debt market by issuing bonds in July 2018.

The move comes after Jio returned almost all of its high-cost debt after raising billions in equity funding last year from several private equity investors. The capital is expected to help Jio roll out 5G services after buying airways worth $8 billion in March 2020, presenting itself as the biggest bidder in the spectrum auctions.

According to analysts, Jio’s return to the debt market was expected owing to RBI’s efforts to drain excess liquidity from the banking system. RBI’s efforts have pushed borrowing costs for AAA graded five-year corporate debt to a nine-month high, making for an ideal time for Jio to raise funds through bonds. Although the yields have slightly hardened, it is favourable for investors to lock into long-term rates as the RBI is widely expected to increase interest rates after April. However, Reliance Industries’ shares fell by 20 points in the early trading hours after the announcement.