Reliance Plows Billions From Stake Sales Into Debt Funds

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As observed by Subhadip Sircar, Divya Patil, and Saket Sundria at Bloomberg, for Reliance Industries is not alone in observing the curve steepening 2s-10s in corporate bonds in India and EM at large, is proceeding faster than the steepening playing out in sovereign bonds. Monitor curve steepening effects for all EM corporate and sovereign yield curves using Overbond’s curve visualization and screening tools.

Source: Bloomberg

Reliance Industries Ltd., the conglomerate owned by Asia’s richest man, is plowing billions into Indian debt funds after receiving cash from stake sales and a rights issue, according to people with knowledge of the matter.

The monies have been deployed into ultra-short and money-market funds, and others focused on debt with an average of three-to-five year maturities, according to fund managers who asked not to be identified in discussing investment details.

Mukesh Ambani’s dealmaking lured about $20 billion of investments from Google to Facebook Inc. into his digital platform in recent months, raising much anticipation over his plans for the money. The scale of Reliance’s fund flows in the past weeks has become the talk of India’s financial markets, with money managers positioning to get a slice of the pie.

The conglomerate, with interests spanning petrochemicals, retail and telecom, may have deployed as much as 350 billion rupees ($4.7 billion) across the nation’s debt houses, according to estimates by two of the money managers.

“‘Lately, we have seen sharp inflows into mutual funds’ debt plans from a large conglomerate,”’ said Dhirendra Kumar, chief executive officer at Value Research Ltd., a mutual fund advisory firm, without naming the company. “I expect this to continue for some more time.”

A Reliance spokesperson declined to comment.

Rupee Flows

Foreign currency traders have pointed to the deluge of Reliance-related money pouring into the nation in recent weeks, which helped the rupee advance more than 1% in the past month to become Asia’s best-performing currency.

In June, Reliance said it became free of net debt after selling stakes in Jio Platforms Ltd., its digital unit, its energy business, as well completing a rights issue. So far, the company has received some 1.2 trillion rupees from the Jio investments, according to a tally of company filings.

The Reliance money is for longer-term investment, and isn’t just parked with the funds, according to two of the people. The Indian corporate giant may be taking a bet on the interest-rate cycle with its investments, one person said.

Giant in Markets

The fund flow is adding to the rally in short-duration bonds, with banks and investors also jumping into such debt amid expectations for more rate cuts by the Reserve Bank of India. The 5.22% 2025 bond yield has dropped 19 basis points this month, more than the eight basis points decline in the benchmark 10-year yield.

Reliance’s influence in the financial market has in the past also drawn attention. Last year, the company and a unit accounted for more 60% of a currency swap auction held by the central bank.