India Infrastructure Finance Company (IIFCL) is planning a ‘masala bond’ issue early next year with a potential resource mop-up of $1 billion, a top company official said.

This government-owned company is looking at leading financial centres, such as London and Singapore, for issuing these bonds, Sanjeev Kaushik, Deputy Managing Director, IFFCL, said.

Masala bonds are Indian rupee-denominated bonds issued in offshore capital markets.

However, these are offered and settled in US dollars to raise Indian rupees from international investors for infrastructure development in India.

First tranche

“The first tranche of fund raising may be about $300-400 million equivalent in INR bonds. This is a market (masala bonds) that we would like to develop and deepen,” Kaushik told BusinessLine .

Kaushik said that IIFCL has already approached the Department of Financial Services for permission to issue the masala bonds.

“The process is already on. We have floated the request for proposal. We are in the process of appointing bankers,” he said.

Kaushik said that London Stock Exchange (LSE) could be an ideal location for doing the issuance given the advantages of access to a deeper pool of capital and investors who could provide longer-term funds.

Also, LSE is the right place for entities, such as IIFCL, to be able to command greater visibility internationally, he said.

However, the final decision on the exact offshore market where the bonds would be issued was yet to be taken, Kaushik added.

IIFCL is also looking at a green bond in the medium term. “London is ideal as that is where investors who understand all these markets are,” he said.

Asked if IIFCL’s masala bonds issuance will be done by its London subsidiary, Kaushik said that the fund-raising would be done by the Indian entity and not by the overseas subsidiary. “Because the masala bonds will result in INR proceeds, we would like to deploy them in India. The London subsidiary also has separate plans, he said.

Nikhil Rathi, CEO of LSE Plc and Director of International Development, said that London was the largest secondary market for international fixed income in the world.

Earlier in the day, Rathi, who was hosted by IIFCL, gave a presentation to Indian companies on the various offshore fund-raising options through the LSE.

“There is ample scope for Indian companies to raise debt funds from the London market and use the LSE as platform. The international investment community is very keen to invest. India is the fastest growing economy in the G20. IMF has stated that India is in a bright spot,” Rathi told BusinessLine .

Rathi talked about the experience of London being the largest masala bond market and deepest international fixed income market.

He also spoke about the “strategic ambition” of building together (India and UK) and developing a channel for financing Indian infrastructure.

On the occasion of Prime Minister Narendra Modi’s recent visit to the UK, several Indian organisations, such as the Railways, HDFC and YES Bank had announced their intent to raise funds from the London market.

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