London Launches $450m Masala Rupee Bond

Lisa Smith, BA (Hons), CeFA

The London Stock Exchange has issued the first Indian rupee offshore ‘masala’ bond worth US$450 million.

The bond is the first rupee-denominated bond available outside India.

Demand was so great that the bond was over-subscribed by four times.

Leading Indian bank, the Housing Development Finance Corporation (HDFC) issued the bond to raise cash to spend on developing housing and providing mortgages.

The bond raised 30 billion Indian Rupees and pays an annual return of 8.33% over a three-year fixed term.

Investment milestones

The past 12 months have seen some key milestones in the financial partnership between Britain and India, including:

  • August 2015: First ever green masala bond listed on the London Stock Exchange by the International Finance Corporation (IFC), the private sector arm of the World Bank.
  • November 2015: While visiting the UK, the Indian Prime Minister Narendra Modi announced that a railway rupee bond would be issued in London to finance the upgrading of India’s railway network.
  • April 2016: Piyush Goyal, Indian Power Minister, announced that US$1 billion of rupee bonds would be listed in London by Indian public sector corporates.
  • June 2016: Axis Bank listed US$500 million green bond in London, India’s first ever certified international green bond.
  • July 2016: HDFC issued first ever offshore rupee-dominated bonds by an Indian company on the London Stock Exchange.

Economic ties

Chancellor Philip Hammond said: “I’m delighted that HDFC chose to list this landmark bond in London. It represents a major vote of confidence in our city as the leading global financial centre and is further proof that Britain is a great place to do business.

“This deal signifies a strengthening of the already close economic ties between the UK and India and paves the way for further masala bonds to be listed in the UK. It is a taste of things to come.”

London Stock Exchange CEO Nikhil Rathi also celebrated the deal.

“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 economy by 2030,” he said.

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