'Masala Bonds’ LSE Listing Revives Kerala’s Dreams
Thiruvananthapuram: The financial model of raising funds set by Kerala Infrastructure Investment Fund Board (KIIFB) was an unprecedented one in the economic history of India with Chief Minister Pinarayi Vijayan ringing the bell marking the opening of the trading session in London Stock Exchange (LSE) on May 17 in which ‘Masala Bonds’ of the Board were listed for the first time.
Chief Minister Pinarayi Vijayan opened the trading session in LSE on May 17 in which ‘Masala Bonds’ of KIIFB were listed for the first time
The State Government floated the Rs. 2150-crore-worth bond in the International Security Market (ISM) of LSE with an aim to raise funds for developing and rebuilding infrastructure in the State which was ravaged by floods of catastrophic proportions in August last year.
“London Stock Exchange warmly congratulates KIIFB on its landmark debut ‘masala bond’. Our markets have enabled issuers to raise over $7.5 billion equivalent, allowing ‘masala bonds’ to evolve from a specialist segment to a mainstream asset class. KIIFB’s bond highlights London’s status as a leading international financing centre, offering issuers access to the deepest pool of long-term international investor capital as well as best in class listing solutions,” said Darko Hajdukovic, Head of Fixed Income, Funds and Analytics, UK Primary Markets, LSE in an official statement.
The Masala Bonds of KIIFB were listed as part of its plans to mobilise Rs. 50,000 crore for major infrastructure development in the State. “This was not only the first-ever offshore capital market issuance from a state-level entity from India, but also the largest dual currency issue by a sub-sovereign-backed entity from the entire emerging markets and Asia,” KIIFB said in an official statement.
According to KIIFB, the transaction which was priced earlier this year had witnessed good participation of financial market players. “With a view to establishing its credit profile and market standing, KIIFB had undertaken a detailed rating exercise through two international credit rating agencies – Standard and Poor’s and Fitch Ratings,” it added.
What are Masala Bonds?Masala bonds are bonds issued outside India but denominated in Indian Rupees, rather than the local currency. Masala is an Indian word and it means spices. Compared to dollar bonds, where the borrower takes the currency risk, masala bond makes the investors bear the risk.
The first ‘masala bond’ was issued by the World Bank-backed IFC in November 2014 when it raised Rs. 1000 crore bond to fund infrastructure projects in India. Later, in August 2015, IFC issued ‘green masala bonds’ for the first time and raised Rs. 3.15 billion to be used for private sector investments that address climate change in India.
In July 2016, HDFC raised Rs. 3000 crore from ‘masala bonds’ and thereby became the first Indian company to issue ‘masala bonds’. Later in that year, National Thermal Power Corporation (NTPC) issued first corporate ‘green masala bonds’ worth Rs. 2000 crore.