India’s state energy firms eye “masala bonds” for funds

India’s state-owned energy companies are looking at raising up to $1 billion through “masala bonds”, as the country gears up to meet its ambitious renewable energy target of 175 gigawatts installed capacity by 2022, a government statement said.

Masala bonds are primarily rupee denominated bonds issued to overseas buyers. In 2015, IFC issued the first masala bond listed on the London Stock Exchange. The bonds worth over Rs 1,000 crore were issued in a range of tenors to raise funds for infrastructure projects.

The statement said Indian state firms were likely to examine rupee denominated debt instruments like masala bonds to create and develop a new market and identify benchmark prices for these new instruments. The issuances, which would be offered by blue chip government companies, are expected to help evolve new ways of funding the renewable energy space.

Companies looking at this fund-raising option include NTPC, Neyveli Lignite Corporation, Power Finance Corporation, Power Trading Corporation and Rural Electrification Corporation.

They are likely to launch these masala bonds totalling $1 billion in the next three or four months in the UK to gauge the investor appetite. The tenor of these bonds is likely to be limited to a band of five to seven years and these are going to be in smaller denominations ranging from $150-250 million. These will be subject to decisions made by the boards of the companies.



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