International Finance Corporation (IFC), the World Bank Group member, was in the news recently for proposing a $1-billion offshore rupee bond offering. In the first tranche, some time ago, IFC had raised about $170 million (Rs 1,000 crore).
Given the need for foreign currency in the current environment, this is one offering that the government is keen to see succeed. In an interview to Business Line , Serge Devieux, Regional Director, IFC, points out it was not the amount itself that was important as much as the right signals it sent to the market. According to him, this was a show of confidence, especially at a time of volatility. It showed to everyone that there were investors who were willing to take a rupee risk. Excerpts:
We have three pillars in our strategy: inclusive growth, sustainable growth and global integration.
We want to support sustainable infrastructure. We have been identifying areas in infrastructure where we can invest. We are talking to the government. We are also looking to deepen the capital markets in the country.
We are looking at sectors, such as power, infrastructure and financial institutions (microfinance institutions) to invest in India.
We are looking at what we can do to raise local currency to support infrastructure. We recently raised $170-million rupee bonds overseas out of the planned $1-billion programme. About 70 per cent of the investors in the first tranche of the programme were from the US.
The next step is to offer a similar bond programme locally. This could be more long term in nature, say about 8-15 years.
We will also be helping enterprises that are suffering from the global crisis. If such companies need more debt, even restructured debt, and equity, we will be ready to do that. Last year, we invested $1.3 billion in India. We intend to invest $4-5 billion in India over the next few years.
Will financing from IFC come at a concessional rate?
We are not into concessional lending. What we offer is commercial finance and on market terms.
Many times, we do what commercial players cannot do. IFC generally gives long-term financing for projects. We give highly customised financing, specific to projects of the companies.
It is the availability of the right financing at the right time that is more important to the client than favourable interest terms.
Given the huge response for the first tranche of your $1-billion offshore bond, why did you not raise more than $170 million?
Our global treasury department manages these things. They raise money in all currencies. From what I understand, we wanted to be sure that the issuance will succeed.
Therefore, we went with a small amount, relatively speaking. We could have issued more. Nevertheless, we can go to the market again depending on the conditions.
The most important thing that came out of this issue was the confidence international investors still have in India. They were ready to take a rupee risk.
Where have you deployed the money that you have raised so far through this bond?
It will go into various types of investments.
First, we plan to invest some part of it into existing government papers; then it will be deployed according to the projects that we have, according to the tenor of the money we have raised.
The offshore market is not a very long-term market. We have raised three-year money, so we will deploy it in projects which can offer reasonable returns in the short term.
How much have you been impacted by the slowdown?
Yes. We have been impacted, there is no doubt. Like everything else, this is global. However, the good thing is that, as long-term players, we can suffer short-term volatility.
We are also counter-cyclical investors. In times of volatility, we have the right mindset and instruments to take positions that a normal investor would not be able to take.
We have been doing it for many years.
vageesh.ns@thehindu.co.in