Offshore rupee-denominated bonds seem to have caught the fancy of foreign investors, going by IFC’s move to issue another round of global Indian rupee bonds — the second in three months.
IFC this week issued another round of three-year global rupee bonds worth Rs 1,000 crore (about $ 161 million). These bonds carry a coupon rate of 7.75 per cent.
Investors for this transaction include asset managers, private banks, insurance companies and central banks, in Asia, Europe and the US. The rupee-denominated bonds will be listed at Luxembourg and Singapore.
Nearly 60 per cent of the bond distribution will go to investors in the US, 26 per cent in Europe and 14 per cent in Asia.
Foreign investor interest in rupee exposure is palpable, given that IFC had to upsize this transaction from Rs 300 crore to Rs 1,000 crore in the wake of increased investor interest, sources close to the developments said.
The latest bond offering adds to the first IFC global rupee bond issued in November 2013 for a similar amount of Rs 1,000 crore (about $161 million) under the $1-billion IFC global rupee bond programme.
Leads the show Even as other multilateral institutions such as ADB are yet to leverage on the increased foreign investor appetite for rupee-denominated offshore bonds, the IFC, which is a private sector-focused member of the World Bank, seems to have stolen a march on this front, say economy watchers.
. “The strong market reception for the second IFC global rupee bond signals continued investor interest to rupee exposure,” said Monish Mahurkar, IFC Director for Treasury Client Solutions.
“Attracting foreign investment is key, as we continue to work with the Indian authorities on deepening the rupee capital markets and providing an alternative source of rupee financing for investment in the country.”
IFC global rupee bonds are denominated in Indian rupees but settled in dollars, with all principal and coupon payments tied to the dollar-rupee exchange rate.
IFC converts bond proceeds from dollars into rupees on the domestic spot exchange market, and uses the rupees to invest in the country.
Over the years, IFC has issued bonds in 14 local currencies, including the Brazilian real, the Chinese renminbi, the Nigeria naira and the Russia rouble. Often, IFC is the first international or corporate issuer of local currency bonds in a market.
India accounted for $4.5 billion of IFC’s committed investment portfolio as of June 30, 2013 — more than any other country.