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IFC, a member of the World Bank Group, has launched Masala bonds programme worth $1 billion to fund its rapidly-expanding investment activities in India.
The first tranche of $100 million under the programme, which opened last night at the London Stock Exchange, was sold to a range of investors, including asset managers, banks, and a pension fund in the US and Europe.
Masala bonds are rupee-denominated borrowings issued overseas. IFC uses them to raise rupee funds overseas, and brings the proceeds to India for investments. IFC pioneered the Masala Bond Programme in October 2013 to support capital market development and to provide rupee financing for investment activities in India. The name Masala was chosen to give the bonds a strong Indian flavour.
Infrastructure projects
India has been taking a series of steps to support Masala bonds. Last month, Indian authorities exempted withholding tax on these bonds. The Reserve Bank of India has permitted banks to issue Masala bonds overseas for their capital requirements and to finance infrastructure and affordable housing.
“Our investment activities in India touched a record high last year. 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,” said Mengistu Alemayehu, Director, South Asia, IFC.
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. Citing successful completion of the programme by IFC, the Reserve Bank of India issued guidelines in September 2015.
“The bulk of our investments in India are in the local currency. The Masala bond market remains an attractive source of financing and we are tapping it again to fund an ever-growing pipeline,” added Keshav Gaur, Director, Treasury Client Solutions, IFC.
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