IFC in talks with Indian regulators to sell $2 bn in offshore rupee bonds

Mumbai: The International Finance Corp (IFC), the World Bank’s private sector arm, is in talks with Indian regulators on selling another $2 billion in rupee-denominated bonds overseas, signalling strong foreign interest in gaining exposure to the country.

The IFC launched a maiden, $1-billion, offshore, rupee-linked bond programme last year to raise money for private infrastructure projects in India. It was completed in April and attracted strong demand. The programme has allowed foreign investors to gain further access to India, while the country has benefited from a small step towards internationalisation of the rupee and gets help in raising funds for infrastructure.

[caption id=“attachment_89976” align=“alignleft” width=“380”]  Reuters[/caption]

The IFC also said on Tuesday it had raised around $100 million through an issue of rupee-denominated bonds in India, christening them “Maharaja bonds”. The debt, which targets both foreign and domestic investors, is part of the organisation’s $2.5 billion onshore debt programme.

More from Finance

Asian markets, Wall Street hold gains after Fed signals easing extraordinary support measures for economy SuperMoney indeed: Mumbai-based startup raises a million USD from Unitus Ventures

Serge Devieux, regional director of the IFC for South Asia, told reporters the organisation had been surprised at the demand for its offshore issuance, giving it confidence in launching the onshore debt programme.

“The response was immense. It was many times oversubscribed,” Mr Devieux said about the offshore sale. “There are quite a lot of investors out there, whether local or international, who want to make an investment.”

Keshav Gaur, IFC’s head of treasury client solutions for Asia, Europe, the Middle East and North Africa, said the organisation was “still talking to the regulators” about expanding the offshore bond sales by $2 billion.

The rupee has rallied 13 per cent since hitting a record low of 68.85 per dollar in August last year, helped by measures to narrow the current account deficit and the RBI’s commitment to curb inflation.

Investors have also welcomed the election in May of Prime Minister Narendra Modi, who has pledged to revive the economy and the investment climate.

The IFC’s $1 billion offshore bond was followed by the Asian Development Bank’s first-ever sale of rupee-linked bonds abroad last month with a Rs. 300 crore issue.

Foreign investors’ exposure to rupee debt could get a further push should India join Euroclear, the world’s largest securities settlement system, which would let foreign investors settle domestic government bonds on the system.

The IFC’s domestic sale on Tuesday involved a Rs. 600 crore ($98.5 million) issue with four tranches with maturities ranging from five to 20 years.

Sales by the IFC of onshore bonds could help with raising funds in the capital markets for India to pursue infrastructure projects.

In mid-July, the government sought to encourage banks to issue bonds to fund infrastructure by exempting these bonds from reserve requirements.

Reuters