Reliance Industries (RIL), India’s biggest company by market value, is planning to raise around

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$3 billion (Rs 14,010 crore) in foreign currency loans to prepay short-term loans taken to finance its broadband business and other general corporate purposes in the next three to four months.

Bankers familiar with the development told Financial Chronicle that RIL was looking at foreign currency loans because they are cheaper at around 170-190 basis points over the London interbank offered rate (Libor).

From July 1, Indian banks fixed their base rates above 7 per cent, much higher compared with rates available for AAA-rated Indian companies in the overseas debt market. The benchmark six-month Libor is hovering around 0.80 per cent.

RIL recently paid more than Rs 12,848 crore to the government in broadband wireless access (BWA) spectrum fees after acquiring Infotel Broadband in June.

“The company made payments through internal accruals and short-term loans. It is possible that RIL will prepay the costly short-term loans with long-term foreign currency loans,” a banker said.

Bankers say the company may even try and balance high borrowing costs in India by raising funds in advance for payments that may come up in the next five to six months. The fear is always there that interest rates may even go up, the banker said.

An email query sent to an RIL spokesperson did not elicit any response.

The new telecom regulations for spectrum licence allow companies to refinance loans taken for investment in 3G and broadband wireless access with external commercial borrowings to help them reduce interest rates.

Last month, RIL raised around $1 billion in two tranches at around 170 basis points and 190 basis points over Libor for general corporate purposes.

According to RIL’s latest annual report, its total debt outstanding on March 31 was Rs 62,495 crore compared with Rs 73,904 crore a year ago. Of this, long-term foreign currency debt was Rs 51,870 crore or 83 per cent of the total debt.

The average maturity of the company’s long-term debt is around four years and the proportion of its short-term debt to total debt is 9.5 per cent. For the same period, the company had cash and cash equivalents of Rs 21,874 crore.