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Business News/ Market / Stock-market-news/  IFC plans onshore rupee-bond for India
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IFC plans onshore rupee-bond for India

IFC is in talks with the govt 'to get the right waivers and approvals' for the onshore rupee-bond issue

Last month, IFC raised `1,000 crore, or $160 million, by selling its first Indian rupee bonds to asset managers, central banks and other bank-related investors overseas. Photo: Pradeep Gaur/MintPremium
Last month, IFC raised `1,000 crore, or $160 million, by selling its first Indian rupee bonds to asset managers, central banks and other bank-related investors overseas. Photo: Pradeep Gaur/Mint

Mumbai: International Finance Corp. (IFC), an arm of the World Bank, will sell long-term bonds to investors in India for the first time to raise as much as $5 billion (around 30,850 crore on Thursday), buoyed by the successful sale of its first overseas rupee-denominated bonds last month.

“We plan to have an onshore issue after the offshore issue which will help us finance infrastructure projects and longer term assets in India," Serge Devieux, South Asia director of IFC, said in an interview on Thursday. The agency is in talks with the government of India “to get the right waivers and approvals", he said.

Last month, IFC raised 1,000 crore, or $160 million, by selling its first Indian rupee bonds to asset managers, central banks and other bank-related investors overseas. The three-year bonds, offered under its $1 billion offshore rupee bond programme, were priced at 7.75% and mature on 3 December 2016. The bonds will be listed on the Luxembourg and Singapore exchanges.

Devieux said a long-term rupee bonds will help IFC finance long-gestation projects like roads, power plants, and healthcare facilities in India.

India’s 12th Five-year plan (2012-17) estimates that the country requires $1 trillion of investment in infrastructure during that period.

Devieux said the onshore issue will be a $4-5 billion programme, but it will take “a few months" to launch.

“We need to take stock because we are talking big amounts. There is longer-term investor appetite in India, there is huge amounts of investible money out there from insurance companies, pension funds, mutual funds. It will be a 10-year, 12-year or eight-year issue depending on the market appetite," he said.

IFC’s plan to sell long-term local bonds is intended to make larger amounts available to make “larger disbursements", which could also be for mortgage loans, Devieux said.

“Primary investors in such bonds will be institutions," said N.S. Venkatesh, treasurer at IDBI Bank Ltd. “There will be investor interest from institutions like banks for the bond issue of multi-lateral institutions like IFC given that it is a top rated institution."

In November, IFC raised $160 million out of the $1 billion offshore bond programme. The initial repayment of principal and coupon is to be in dollars but tied to the dollar rupee exchange rate. IFC will convert bond proceeds from dollars into rupees on the domestic spot exchange market and use the rupees for investment in India.

“We can now give loans in rupees, instead of disbursing US dollars This eliminates currency risk if our borrowers are operating in the rupee environment which 95% of the people here do. It allows our borrowers to match their activity with their currency, they can generate cash flow in rupees and pay back in rupees, eliminating the need for risk mitigation," Devieux said, explaining the rationale for raising rupee resources.

Raising money in local currencies also saves IFC hedging cost. The agency raises $20 billion of financing per year.

The rupee’s exchange rate has been volatile in recent years. Since January this year, the rupee has weakened 10.96% against the dollar and has lost the most after the Indonesian rupiah among Asian currencies.

“The ability to raise money in different currencies allows our treasury to provide the right currency, reducing the risk and giving us a more convenience because it will be cheaper as it cuts the hedging cost," Devieux said.

IFC, however, has not yet finalized to whom its going to disburse the proceeds of its offshore bond.

“A part of it could be invested, three-year government paper. The projects and investments have to be identified. We will like to disburse as fast as possible but there is no deadline," Devieux said.

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Published: 06 Dec 2013, 01:02 AM IST
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