Last week, the London Stock Exchange welcomed Piyush Goyal, the Indian minister for power, coal, and new and renewable energy, and a senior delegation of some of the country’s most exciting renewable energy companies, for a round table to discuss financing India’s renewable energy projects. The minister expressed a desire to use the masala bond market to raise $1 billion for expansion of renewable energy capacity. Fast forward a week and the London Stock Exchange is in India at the India Renewable Energy Congress.
Clearly, green finance is firmly on both India’s and the UK’s agenda.
The Indian government has ambitious plans for infrastructure development and renewable energy. This includes goals to achieve 20,000 MW of solar capacity by 2017, that’s nearly five years ahead of the previous government’s timeline, and to make India a 100% electric vehicle nation by 2030.
To achieve these ambitious targets will require significant investment, much of it international.
Goyal’s visit followed hot on the heels of rail minister Suresh Prabhu’s visit to London last year. That’s where the the city’s connection is essential. They met global investors to discuss the international financing and green financing of India’s railway infrastructure.
Indian banks are making their mark in London. In November 2015, Yes Bank announced its intention to list up to $500 million worth of green bonds in 2016, as well as using a global depository receipt programme in London to support its planned equity capital raising. Yes Bank and London Stock Exchange signed an MoU to collaborate on bond and equity issuance for Indian corporates, including with respect to green finance.
A global approach is the best solution to bridge the gap in India’s capacity to self-finance infrastructure and green projects. London—with the world’s deepest and most diverse pool of international investor capital, expertise in infrastructure financing and the most comprehensive green and masala bond offering of any major international exchange—has the unique ability to support India in its long-term plans.
London Stock Exchange has become the leading global market for offshore rupee-denominated debt, masala bonds, which will, once the market opens up further, allow Indian companies to raise money internationally without foreign exchange risk. We have seen 29 offshore rupee bonds listed in total on our markets that have raised equivalent to $2.85 billion. The International Finance Corporation (IFC) has been the anchor issuer for the masala bond market, using proceeds from these issuances to invest in infrastructure programmes, including a partnership with Axis Bank.
In June 2015, we introduced a dedicated green bond segment across our fixed income markets, allowing us to capture the strong appetite for green finance. There are now 27 green bonds on our markets in six currencies, including the rupee, which have raised well over $5.8 billion equivalent combined.
But it is not just about debt, it is also about supporting renewable-energy-focused companies and, importantly, complementing local market listings. There are now 38 green companies, with a combined market capitalisation of $11 billion, listed in London, including 14 renewable energy funds. These have been able to access the most international market in the world, home to $2 trillion in global equity assets under management, as have the 50 Indian companies listed and traded on our markets, with a combined market cap of $155 billion. Indian companies raising capital in London are able to access investors from across the world.
The bond between the two countries was never more highlighted than during the landmark visit of Prime Minister Narendra Modi last year. During his trip, India and Britain signed trade deals worth up to £12 billion, underlining London’s role as the pre-eminent source of global capital for ambitious companies and countries. As bilateral trade between the two countries grows—the UK is now the largest G20 investor in India—this is being underpinned by a developing green theme.
The author is head of Primary Markets, India, Africa and Middle East, London Stock Exchange