The International Finance Corporation (IFC), the private-sector arm of World Bank, on Wednesday announced a R15,000-crore ($2.5 billion) onshore rupee-denominated bond issuance to be spread over the next five years.
The proceeds will be used for investing in infrastructure projects in India. The proposed ?AAA? bonds will be priced close to government securities and will have maturity period of 10 years and above. They will be privately placed to institutional investors including FIIs, insurance and pension funds. The yield will be set through a book-building process.
The domestic bond programme comes after IFC?s
$1 -billion offshore rupee-denominated bond issue last year. Under the programme, IFC will use a combination of rupee-denominated bonds and swaps to raise local-currency financing of up to R15,000 crore over the next five years, IFC executive vice-president and CEO Jin-Yong Cai said in New Delhi.
Finance secretary Arvind Mayaram said, ?It will also create a new momentum in the development of corporate bond market and long-term bond market. It will create a benchmark that will determine the yield curve (for corporate bonds), which can then be followed by others.?
The bonds will be offered over multiple tranches. The size and tenure of the tranches will be decided on the basis of the projects IFC will fund. The bonds will be rated AAA, making them especially attractive for debt investors looking to park funds in India on a longer-term basis, IFC representatives said. ?The tenure of these bonds will be driven by project needs and because we are targeting only infrastructure projects, we will need long-term money. So we will be happy to issue as long a tenure as possible. It could be as long as 20 years in some cases,? said Keshav Gaur, treasury head for Asia, Middle-East, Europe and North Africa at IFC. ?We are expecting the yield to be close to the ones offered on g-secs. We will be similar to those plus minus one to two basis points,? he said.
India?s 10-year bond yield ended down 5 basis points at 8.48% on Wednesday, on speculation that foreign portfolio investors were active buyers, especially in 5-8 year debt, suggesting an improvement in the global risk appetite and a positive outlook on local bonds. On April 4 this year, the 10-year bond yield had touched 9.11%, the highest this fiscal.
?We will be targeting institutional investors. There will be no quota for retail investors. It will be open to foreign investors who are investing in India through the FII route. The currency risk will be borne by the investors,? Gaur said.
India needs $1 trillion in ramping up its creaky infrastructure over the next five years.
The Modi government?s first Budget was marked by a number of announcements to boost infrastructure, including development of 100 smart cities, high-speed rail networks, and improving rural infrastructure