Theresa May visit pushes more masala bonds

 Four rupee-denominated or “masala” bonds worth 600 million pounds (Rs 5,000 crore) are expected to be listed in London in the next three months, confirming the British capital’s status as the destination of choice for such instruments outside of India.

Already since July, masala bonds of over 900 million pounds have been issued in London, the equivalent of over 70 per cent of the global offshore market.

A masala bond is a financial instrument through which firms raise money from overseas markets, like London, denominated in rupees. In this instance, the four bonds will provide financing to expand India’s highway and rail networks and meet the country’s ambitious energy efficiency and renewable energy plans.

Prime Minister Narendra Modi unveiled the bonds during his visit to the UK last year. Indian Power Minister Piyush Goyal announced that $1 billion of rupee bonds would be listed in London by Indian public sector energy corporates in 2016. Other companies that raised funds in London include Axis Bank-listed $500 million green bond, India’s first certified international green bond; HDFC and National Thermal Power Corporation (NTPC).

The new bonds were announced on the day Prime Ministers May and Modi met in New Delhi to discuss increased economic cooperation between Britain and India. These are the second wave of masala bonds to be issued in London following the world’s first Indian offshore masala bond listed by the Housing Development Finance Corporation (HDFC) in London in July 2016.

The HDFC bond was worth 365 million pounds and was heavily oversubscribed by investors. HDFC’s bond marked the beginning of the global offshore masala bond market that is expected to be worth around 81 billion pounds by 2020.

The new bonds will be issued by Indian government-backed corporates Indian Railway Finance Corporation (IRFC), Indian Renewable Energy Development Agency (IREDA), Energy Efficiency Services Limited (EESL) and the National Highways Authority of India (NHAI) by the end of January 2017.

The masala bond market is a great example London’s financial services sector at its best. London, as the leading global centre for green finance, is also the obvious place for India to look for rupee-denominated green financing for its ambitious renewable energy plans. This is why EESL and IREDA are all looking to London to fund green investments through their green bond issuances in the coming months.

“This is another vote of confidence in our world-leading financial services and further proof that Britain is open for business,” May said. “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.”

Economic and trade relations with India are a top priority for the UK. The UK invests more in India than any other G20 country, while India is one of the top sources of investment into the UK. India is already the fastest growing major economy in the world and is projected to be the world’s third biggest by 2030.

(Anasudhin Azeez the author of this story is the editor of Asian Lite daily in London. He is in India with British Prime Minister Theresa May’s delegation. He can be contacted at