India: Demand for Global Rupee Bond - IFC Floats Rs 170-crore Masala Issue

Nov 2015
India, November, 10 2015 - International Finance Corporation, the private finance arm of the World Bank, has launched a Rs 170-crore ($25-million) masala bond issue, betting on the growing interest in India among international investors, and will help Indian companies issue rupee bonds abroad.

Masala bonds are rupee denominated bonds issued in foreign markets.

"Investors have shown strong demand for global rupee bonds despite the volatility in emerging market currencies," IFC vice president and treasurer Jingdong Hua told ET.

"We have seen even greater momentum following the Reserve Bank of India's recent approval for Indian corporations to issue Masala debt," he said over phone from Washington.

Proceeds from the issue of fouryear bonds would be used to support overseas rupee bond issuance by Indian companies, he said. IFC had carried out the first overseas issuance of a rupee bond in 2013. "For international investors Indian rupee is an interesting asset class. There is sustained interest. Slowdown in China has led investors to diversify," Jingdong said.

"The (Indian) government has shown determination to fundamentally upgrade infrastructure. That momentum is very strong. Investors have a very strong view on India over medium to long term," he said.

Jingdong said masala bond could be a very good funding source for Indian corporates. "We are happy to help by sharing our own experience and market knowledge and sometimes even credit enhancing or anchor investing in some of these masala bond issuances by Indian companies," he said, adding that some had already approached IFC.

He said India is a top destination with over $5 billion worth of IFC's committed portfolio in the country. "This is a good indication of not just our commitment but also our confidence," he said. The Reserve Bank of India has recently allowed Indian companies to issue rupee bonds in offshore markets.

IFC's latest four-year masala bonds were all purchased by KBC Asset Management, a European fund manager. The yield on the bonds was 6.5%.

IFC had successfully issued 10-year Rs 10,000 crore masala bonds in London in November 2014 to increase foreign investment in India. That was the first rupee bonds listed on the London Stock Exchange.

Masala bonds will give a boost to infrastructure financing in India. These rupee-denominated bonds issued in offshore capital markets will be offered and settled in dollars to raise rupees from global investors.

IFC will convert these bonds from dollars to rupees to finance private investment in India. If these bonds are lapped up by global investors, it would reflect their confidence in the Indian economy and its currency. It will also raise demand for similar products.



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