More entities are exploring fundraising opportunities through Gujarat International Finance Tec-City (GIFT City) treasury centres to benefit from the tax advantage. Certain companies are also in discussions to set up treasury centres in GIFT City to capitalise on this opportunity.
Adani Transmission Step-One (ATSOL), a subsidiary of Adani Energy Solutions, will likely raise $500 million through dollar bonds through its treasury centre in GIFT City in March or April.
360tf, a trade finance company, also plans to raise fund through this route, people aware of the development said.
Indian Oil and ONGC have already set up treasury centres. They may also view this as an opportunity and pursue fundraising through it, sources said. This serves as a tax-saving move as fundraising via a GIFT City unit avoids withholding tax.
ReNew Global Energy’s recent green dollar bond issuance has spurred companies to explore this option. In late January, ReNew Global Energy issued green bonds worth $600 million maturing in 2031 via GIFT City at 6.5%. This is the first issuance from a GIFT City-registered company. Tax exemptions, cost savings, and operational simplicity make this option appealing, said experts.
The ‘Triple-Lock’ Advantage
“ReNew’s issuance has triggered numerous similar inquiries, given the better pricing and strong demand it got. Market participants are showing strong interest through inquiries about the process and regulatory framework, with more expected to explore this route ahead,” said an official at a rating agency.
The issue was oversubscribed four times, which tightened the pricing by 37 bps and thereby, they were able to get a better rate. Experts noted that the issuer would have to pay 100 bps more onshore in India.
Sovereign Incentives
The official said the Budget’s 20-year tax holiday is like the icing on the cake and is very positive for entities to set up office in GIFT City. “ReNew’s issuance is creating ripples, with similar corporates now viewing GIFT City not just for issuances but as a base for SPVs, central treasuries, and then raise fund from that entity,” he said.
“ReNew has accessed the dollar bond market through its GIFT City treasury entity signalling the comfort of pools of global debt capital with the GIFT City jurisdiction which enables a tax-efficient regime to on lend proceeds to India under ECB route.
“The transaction will enjoy zero withholding tax compared to 9% if its listed and 15% without listing. Moreover, this issuance helps to grow group operations while securing tax efficiencies,” said Tirthankar Datta, partner at JSA Advocates & Solicitors.