Tuesday, April 20

International Finance Corporation launches $1-billion masala bonds

NEW DELHI: International Finance Corporation, a member of the World Bank Group, has launched a $1-billion masala bond programme to fund its investment activities in India.

The announcement comes in the backdrop of the Indian government looking to boost capital flows into the country. The government has taken a series of steps to support masala bonds —rupee-denominated borrowings issued overseas — including exempting these from withholding tax.

The Reserve Bank of India (RBI) also permitted banks to issue masala bonds overseas for their capital requirements and to finance infrastructure and affordable housing. The first tranche of $100 million of IFC’s masala bond programme opened at the London Stock Exchange on Thursday night.

It was sold to a range of investors, including asset managers, banks, and a pension fund, in the United States and Europe, IFC said in a statement on Friday.

IFC pioneered the masalabond programme in October 2013 to support capital market development and provide rupee financing for its investment activities in India. The name ‘masala’ was chosen to give the bonds astrong Indian flavour.

“Our investment activities in India touched a record high last year,” said Mengistu Alemayehu, director, South Asia, at IFC. “In line with our strategy, we have made big strides in the areas of affordable housing, SME finance, distressed assets resolution, renewable energy, logistics, and disruptive technologies. Our pipeline remains strong, and this masala bond programme will help us support our investment activities in the near and medium term.”

By pioneering the offshore rupee market through masala bonds, IFC succeeded in setting an AAA pricing benchmark for the market by strategically issuing bonds for tenors of three, five, seven, 10, and 15 years.

This paved the way for Indian corporate issuers to achieve a more diversified funding source. The RBI had issued guidelines for issuing masala bonds in September 2015. “The bulk of our investments in India are in the local currency,” said Keshav Gaur, director, treasury client solutions, at IFC. “The masala bond market remains an attractive source of financing and we are tapping it again to fund an ever-growing pipeline,” he said.

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