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May Visit Pushes More Masala Bonds

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Prime Ministers Modi and Mrs May at UK-India tech summit

Four rupee-denominated or ‘masala’ bonds worth £600 million are expected to be listed in London in the next three months….reports Asian Lite News

Prime Ministers Modi and Mrs May at UK-India tech summit
Prime Ministers Modi and Mrs May at UK-India tech summit

The decision to list the bonds, worth around £600 million, in London confirms the British capital’s status as the destination of choice for masala bonds outside of India. Already since July, over £900 million masala bonds have  been issued in London, the equivalent of over 70% of the global offshore market.

A masala bond is a financial instrument through which firms raise money from overseas markets, like London, denominated in rupees. In this instance, the four bonds will provide financing to expand India’s highway and rail networks and meet the country’s ambitious energy efficiency and renewable energy plans. Prime Minister Narendra Modi unveiled the bonds during his visit to the UK last year. Indian Power Minister Piyush Goyal announced that $1 billion USD of rupee bonds would be listed in London by Indian public sector energy corporates in 2016. Other companies raised funds in London include Axis Bank listed $500 million USD green bond in London, India’s first ever certified international green bond; HDFC and National Thermal Power Corporation (NTPC).

Prime Ministers Modi and Mrs May at UK-India CEO summit
Prime Ministers Modi and Mrs May at UK-India CEO summit

The new bonds were announced on the day Prime Ministers May and Modi met in New Delhi to discuss increased economic cooperation between Britain and India. These are the second wave of masala bonds to be issued in London following the world’s first ever Indian offshore masala bond listed by the Housing Development Finance Corporation (HDFC) in London in July 2016.

The HDFC bond was worth £365 million and was heavily oversubscribed by investors. HDFC’s bond marked the beginning of the global offshore masala bond market, a market that is expected to be worth around £81 billion by 2020.

The new bonds will be issued by Indian government-backed corporates Indian Railway Finance Corporation (IRFC), Indian Renewable Energy Development Agency (IREDA), Energy Efficiency Services Limited (EESL), and National Highways Authority of India (NHAI) by the end of January 2017.

The masala bond market is a great example London’s financial services sector at its best. London, as the leading global centre for green finance, is also the obvious place for India to look for rupee-denominated green financing for its ambitious renewable energy plans.  Which is why EESL and IREDA are all looking to London to fund green investments through their green bond issuances in the coming months.

“This is another vote of confidence in our world-leading financial services and further proof that Britain is open for business,” Mrs May said. “This government will continue to work closely with both India and our financial services sector to ensure our growing rupee bond market continues to help finance India’s ambitious infrastructure investment plans.”

Economic and trade relations with India are a top priority for the UK. The UK invests more in India than any other G20 country, while India is one of the top sources of investment into the UK. India is already the fastest growing major economy in the world and is projected to be the world’s third biggest economy by 2030.