NTPC’s debut ‘masala’ bond may be green one

By: | Updated: November 18, 2015 1:38 AM

A green bond is a debt instrument in which the funds raised are used for renewable energy or green projects

NTPC is likely to commence investor roadshows in Singapore, London and Hong Kong very soon for its debut rupee bonds which might also be a green bond issuance, sources close to the matter said.

“The dollar-denominated bonds which we issue in the market are used for capital expenditure and our ongoing projects. This (rupee-bond issue) will be a green bond issue and may be used for some other purpose,” a source close to the development said.

A green bond is a debt instrument in which the funds raised are used for renewable energy or green projects.

A bond arranger who is aware of the development said a green bond issuance may not be impossible but he thinks it is unlikely. “The company can do a green bond issuance if they want to but I do not think it will be that way this time,” the source said.

The tenure and the size of the issue is yet to be decided. The company is looking to raise funds through a ‘Regulation S’ bond issue – meant for investors outside the United States – and is waiting for further approvals from the ministry, according to sources. The roadshows may begin either later this week or as early as next week.

“There are a lot of things that are to be decided. We are waiting for some approvals from the power ministry. Dates are not yet decided but the investor road shows are likely to begin very soon,” a source said.

Housing Development Finance Corporation (HDFC) is also looking to raise funds through rupee bonds in the overseas market. The company is believed to have commenced meetings with investors, a bond arranger said.

Indian Railway Finance Corporation (IRFC)—the finance arm of Indian Railways—is also in the fray to raise funds through rupee bonds. The company had floated a request for proposal (RFP) to appoint bankers for the deal earlier this year but was waiting for clarifications on the witholding tax front.

With clarity emerging from the government that withholding tax applicable on rupee bonds would be at 5%, IRFC has once again started the process of mandating arrangers for the deal.

Rupee bonds are significant for the borrowers in the country considering that the currency risk lies with the investors.

It would be interesting to see whether the yields on masala bonds would be lower than domestic rates as that would determine the attractiveness of these bonds. Moreover, the appetite for these bonds will also determine the future course of the issuances in this segment.

International Finance Corporation, a member of the World Bank Group, recently issued R170 crore worth of rupee-denominated bonds—at a yield of 6.5%—as part of its strategic support to Indian companies who are preparing to issue rupee-denominated bonds in offshore markets.

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