Four rupee-denominated bonds, known as masala bonds, worth a total of 600 million pounds ($748 million) are expected to be listed in London in the next three months, the British government said on Monday, as Prime Minister Theresa May began a two-day visit to India.

Masala bond is a financial instrument through which Indian entities can raise money from overseas markets in the rupee,&nbsp;while giving international investors access to higher yields in a zero-yield world.

The latest four bonds will provide financing to expand India&#39;s highway and rail networks and meet its plans to boost energy efficiency and renewable energy, the government said.

They will be issued by Indian government-backed corporates Indian Railway Finance Corporation, Indian Renewable Energy Development Agency, Energy Efficiency Services Limited, and National Highways Authority of India by the end of January 2017.&nbsp;

May has said she wants to use the trip India, her first bilateral visit to a non-European Union country since taking office in July, to boost ties between the countries and pave the way for a post-Brexit trade deal.

The government said that since July, more than 900 million pounds of so-called masala bonds have&nbsp;been issued in London, equivalent of more than 70 per cent of the global offshore market.

&quot;This government will continue to work closely with both India and our financial services sector to ensure our growing rupee bond market continues to help finance India&rsquo;s ambitious infrastructure investment plans,&quot; May said in a statement.

They can be more expensive than issuing bonds in the local market because of India&#39;s 5 per cent withholding tax on such international deals.

As well as a way to borrow overseas, they are also an attempt to make the tightly-controlled rupee more widely available in global markets, similar to the way in which China has moved to sell more yuan debt to overseas investors.

(Reuters)

UK's decision to list four rupee-denominated bonds will also boost India's energy efficiency and renewable energy

Four rupee-denominated bonds, known as masala bonds, worth a total of 600 million pounds ($748 million) are expected to be listed in London in the next three months, the British government said on Monday, as Prime Minister Theresa May began a two-day visit to India. Masala bond is a financial instrument through which Indian entities can raise money from overseas markets in the rupee, while giving international investors access to higher yields in a zero-yield world. The latest four bonds will provide financing to expand India's highway and rail networks and meet its plans to boost energy efficiency and renewable energy, the government said. They will be issued by Indian government-backed corporates Indian Railway Finance Corporation, Indian Renewable Energy Development Agency, Energy Efficiency Services Limited, and National Highways Authority of India by the end of January 2017. May has said she wants to use the trip India, her first bilateral visit to a non-European Union country since taking office in July, to boost ties between the countries and pave the way for a post-Brexit trade deal. The government said that since July, more than 900 million pounds of so-called masala bonds have been issued in London, equivalent of more than 70 per cent of the global offshore market. "This government will continue to work closely with both India and our financial services sector to ensure our growing rupee bond market continues to help finance India’s ambitious infrastructure investment plans," May said in a statement. They can be more expensive than issuing bonds in the local market because of India's 5 per cent withholding tax on such international deals. As well as a way to borrow overseas, they are also an attempt to make the tightly-controlled rupee more widely available in global markets, similar to the way in which China has moved to sell more yuan debt to overseas investors. (Reuters)

Britain to list masala bonds on stock exchange to spur India's infrastructure

Indian banking and financial services company, Household Development Finance Corporation (HDFC) aims to raise more money via so-called &quot;masala&quot; bonds after making its debut issue last month and other Indian companies may follow, the bank&#39;s executives said. 
 
Masala bonds are Indian rupee denominated bonds issued in offshore capital markets. These are rupee-denominated bonds issued to offshore investors settled in dollars and, therefore, the currency risk resides with investors. 
 
HDFC raised 30 billion Rupees on July 14 via the &#39;masala&#39; bond. 
 
Yielding 8.33 per cent and listed on the London Stock Exchange, the bond attracted 87 billion Rupees in bids. 
 
HDFC chairman Deepak Parekh and CEO Keki Mistry, speaking at the London Stock Exchange on Monday, told Reuters masala bonds were an opportunity for Indian firms to raise money, while giving international investors access to higher yields in a zero-yield world. 
 
&quot;India&#39;s need for funding for infrastructure is massive, the private sector has limited resources and the capacity of Indian banks to lend large sums of money is restricted by the amount of deposits they can mobilise,&quot; Parekh said. 
 
&quot;So we have to look overseas for funding.&quot; 
 
&quot;We lend in rupees so we want to borrow in rupees,&quot; he said, noting that of the 50 billion Rupee issuance limit for HDFC under the masala programme, 20 billion remained which the bank would tap in due course. 
 
&quot;We are getting calls from Sovereign Wealth Funds (SWFs) around the world, saying &#39;the next 20 billion, just give it to us&#39;,&quot; he said. 
 
Buyers of the bond launched last month included SWFs, they said. 
 
India has overtaken China to become the world&#39;s fastest-growing big economy and is expected to expand around 7.8 per cent this year. That along with falling inflation and a steady currency has made the country attractive to investors. 
 
HDFC is one of the biggest emerging market financial institutions outside China. The group&#39;s shares are up almost 9 per cent this year, in line with India&#39;s benchmark Nifty index. 
 
Masala bonds can be more expensive than issuing bonds in the local market because of India&#39;s 5 per cent withholding tax on such international deals. But the HDFC executives said falling yields could make up for this as the market expands. 
 
They said several Indian companies were considering masala bonds despite the withholding tax. 
 
HDFC&#39;s bond has risen since its launch and now yields 7.78 per cent, they said. 
 
&quot;It&#39;s a new market ... and my sense was the first issue would be priced a bit higher but if we do a follow-on issue we will be able to do it at a lower cost,&quot; Mistry said. 
 
While thin secondary market liquidity is widely seen as a stumbling block for the masala market, Mistry pointed to the big order book as evidence that this might be changing. 
 
The executives also said HDFC had proceeded with a public issue rather than a private placement for SWFs because HDFC was keen to have a traded instrument. 
 
Parekh said Indian companies would like the withholding tax to be scrapped and are talking to the finance ministry. 
 
&quot;Money we can raise overseas to meet India&#39;s infrastructure needs is far more important than the money the government can make from the withholding tax,&quot; he said. 
 
(Reuters) 
&nbsp;

HDFC raised 30 billion Rupees on July 14 via masala bonds yielding 8.33 per cent

Indian banking and financial services company, Household Development Finance Corporation (HDFC) aims to raise more money via so-called "masala" bonds after making its debut issue last month and other Indian companies may follow, the bank's executives said. Masala bonds are Indian rupee denominated bonds issued in offshore capital markets. These are rupee-denominated bonds issued to offshore investors settled in dollars and, therefore, the currency risk resides with investors. HDFC raised 30 billion Rupees on July 14 via the 'masala' bond. Yielding 8.33 per cent and listed on the London Stock Exchange, the bond attracted 87 billion Rupees in bids. HDFC chairman Deepak Parekh and CEO Keki Mistry, speaking at the London Stock Exchange on Monday, told Reuters masala bonds were an opportunity for Indian firms to raise money, while giving international investors access to higher yields in a zero-yield world. "India's need for funding for infrastructure is massive, the private sector has limited resources and the capacity of Indian banks to lend large sums of money is restricted by the amount of deposits they can mobilise," Parekh said. "So we have to look overseas for funding." "We lend in rupees so we want to borrow in rupees," he said, noting that of the 50 billion Rupee issuance limit for HDFC under the masala programme, 20 billion remained which the bank would tap in due course. "We are getting calls from Sovereign Wealth Funds (SWFs) around the world, saying 'the next 20 billion, just give it to us'," he said. Buyers of the bond launched last month included SWFs, they said. India has overtaken China to become the world's fastest-growing big economy and is expected to expand around 7.8 per cent this year. That along with falling inflation and a steady currency has made the country attractive to investors. HDFC is one of the biggest emerging market financial institutions outside China. The group's shares are up almost 9 per cent this year, in line with India's benchmark Nifty index. Masala bonds can be more expensive than issuing bonds in the local market because of India's 5 per cent withholding tax on such international deals. But the HDFC executives said falling yields could make up for this as the market expands. They said several Indian companies were considering masala bonds despite the withholding tax. HDFC's bond has risen since its launch and now yields 7.78 per cent, they said. "It's a new market ... and my sense was the first issue would be priced a bit higher but if we do a follow-on issue we will be able to do it at a lower cost," Mistry said. While thin secondary market liquidity is widely seen as a stumbling block for the masala market, Mistry pointed to the big order book as evidence that this might be changing. The executives also said HDFC had proceeded with a public issue rather than a private placement for SWFs because HDFC was keen to have a traded instrument. Parekh said Indian companies would like the withholding tax to be scrapped and are talking to the finance ministry. "Money we can raise overseas to meet India's infrastructure needs is far more important than the money the government can make from the withholding tax," he said. (Reuters)

Indian banking company HDFC aims to raise more money via masala bonds

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