The Gujarat International Finance Tec or GIFT City is fast becoming the main destination for companies planning to issue environmental, social, and governance (ESG) securities. This is primarily due to tax efficiencies and a stronger investor base.The share of ESG securities in total debt issuances in Gift City increased to 24% during April-January from 18% in FY23.
Companies have raised $16.8 billion as of January-end in ESG-labeled debt, with around 60% in green bonds, 23% in social bonds, and 15% in sustainability bonds. The issuances have grown 56% in the last two years. Companies raised debt securities worth $69.7 billion through Gift City as of January-end.
On the other hand, companies raised just Rs 10,356 crore through ESG debt securities since 2018, according to data from the Securities and Exchange Board of India (Sebi). For FY26 till January, the figure was Rs 4,175 crore.
Last month, ReNew Global Energy issued green bonds worth $600 million maturing in 2031 via Gift City at 6.5%. The issue was oversubscribed four times, which tightened the pricing by 37.5 bps and thereby, they were able to get a better rate. Experts note issuers would pay 100 bps more onshore in India.
Pricing Edge
“ReNew’s recent issuance—oversubscribed nearly 4x—is expected to spur more players to tap ESG securities amid strong demand. It signals robust overseas investor appetite for green bonds, while issuers gain from superior pricing, Gift City’s enabling ecosystem, and an expanded investor base,” said Nitesh Jain, chief rating officer at CareEdge Global IFSC.
“ESG securities in Gift City are gaining traction as Indian companies leverage IFSCA’s framework to raise funds via green, social, sustainable, and sustainability-linked bonds,” said Pradeep Ramakrishnan, executive director, International Financial Services Centres Authority (IFSCA).
He added that this has been made possible by adopting international taxonomies as part of the framework, which is a win-win for both issuers and investors. it aligns with what global investors already know and trust, making it easier for companies to sell their objectives.
Win-Win for Issuers
According to Sangita John, partner at Cyril Amarchand Mangaldas, a key benefit for green bonds listed in Gift City is lower withholding tax at 9% compared to 15% without listing. “This drives most issuers to list exclusively on Gift City exchanges. The recent issuance by ReNew’s GIFT City treasury center is an example of another route that can now be explored – for entities set up in Gift City, no withholding tax applies. The issuance aims to expand group operations while capturing tax savings.”
John added that the Sebi’s new framework for domestic green and sustainability-linked bonds aims to expand India’s market, aligning local products with global standards, and regulators are actively promoting these products. She said ESG issuances will help issuers to gain more visibility in a global market and investor appetite for ESG-linked bonds remains strong globally.
Green bond investors, often mandated to buy such assets, lack direct access to rupee denominated bond offerings in the Indian corporate bond market without special licenses such as FPI registrations. Offshore ESG bond issuances, often listed on Gift City exchanges, offer them an entry point into the Indian market, enabling issuers to tap a stronger investor base via this route than onshore issuances.
The current financial year has been a dampener for overseas borrowing due to heightened geopolitical uncertainties, which led to slow down in ECB activity. However, with the new guidelines and improved hedging cost, it is expected to improve. The RBI guidelines allow companies to raise up to $1 billion compared to the earlier limit of $750 million. It also allowed companies to raise funds at market-determined interest rates and removed cost caps. Currently, more than half of the overseas borrowing happens through Gift City.
“India is in the process of a broad ESG mandate, but the government is starting with sectors like cement, fertilizers — full mandates might soon be on the horizon. This will require companies to go for green borrowings that will result in an increase in green/sustainable bond issuances in the gift city going ahead,” said Ramakrishnan.