International Finance Corp (IFC) arm of World Bank on 11 November 2014 issued 10 billion rupee Masala bond to fund infrastructure development.
The so-called Masala bonds mark the first rupee bonds listed on the London Stock Exchange. The name masala bond is the Indian counterpart of the Dim Sum bond applied to Chinese offshore issues of IFC. Bonds issued inside India by IFC are known as Maharaja Bonds.
IFC will invest proceeds of rupee-denominated bonds into Axis Bank’s proposed infrastructure bonds.
The yield is 6.3 per cent and it is almost two percentage points lower than the rate at which the Government of India itself can raise money. The latest issue builds on earlier offshore rupee issues of shorter tenure.
The bonds were issued under IFC’s 2 billion US dollar offshore rupee programme. J.P. Morgan is the sole arranger for the issuance.
The bonds are the longest-dated bonds in the offshore rupee markets, building on earlier offshore rupee issuances by IFC at three-, five-and seven-year maturities.
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The IFC Masala bonds set a triple-A benchmark for offshore rupee issuances and pave the way for more foreign investment to help meet India’s private sector development needs.
The move is another step to help internationalise the Indian rupee. Vice president of IFC Hua Jingdong said that International investors see value in the rupee.
The move is a comeout of the new government Make in India campaign which will depend heavily on India upgrading its roads, railways, ports and power stations.
A positive signal was sent to overseas investors by eliminating fuel subsidies which will further improve the country’s finances.
A year ago, when the IFC began planning its initiatives in both the onshore and offshore market, the rupee was weak and international investors spooked.
Since then, Indian equities have rallied in anticipation of the election and after, allowing many companies to raise capital and strengthen their balance sheets.
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