Kerala joins the global Masala Bond drive

The Kerala Infrastructure Investment Fund Board (KIIFB) became the latest Indian entity to reach out to the international markets for its fundraising needs. The Kerala Infrastructure Investment Fund Board's (KIIFB) celebrated its debut Masala Bond listing on the London Stock Exchange with a special market open ceremony recently. KIIFB is the first sub-sovereign entity in India to tap the offshore Rupee international bond market with the $312 million equivalent senior secured fixed-rate bond and is aimed at accessing capital from international investors for the southern state's infrastructure development. “KIIFB strives to be at the forefront of creating a sustainable development model for infrastructure financing in the emerging markets and an exemplar for best practices in corporate governance and fund management,” said KIIFB CEO K.M. Abraham, who described the development as a “milestone” for the company and the state of Kerala. “KIIFB is the first sub-sovereign entity in India to access the international debt capital markets in this manner. This transaction has realised our objective of diversifying our sources of funding by accessing capital from international investors,” he said. The bond, with a five-year tenor and a 9.723 per cent coupon, has been admitted to London Stock Exchange's International Securities Market (ISM). Darko Hajdukovic, Head of Fixed Income, Funds & Analytics, UK Primary Markets, London Stock Exchange said: "London Stock Exchange warmly congratulates KIIFB on its landmark debut Masala bond. Our markets have enabled issuers to raise over $7.5 billion equivalent, allowing Masala bonds to evolve from a specialist segment to a mainstream asset class. “KIIFB's bond highlights London's status as a leading international financing centre, offering issuers access to the deepest pool of long-term international investor capital as well as best in class listing solutions." London Stock Exchange claims to be the largest Masala Bond centre globally, with 49 such rupee-denominated bonds listed across its markets. “The opening of this new listing further enhances London's role as a leading international finance centre, attracting global issuers to its markets and strengthening our relationship with Kerala and India. This is further proof that London is Open as the best city in the world in which to do business," said Rajesh Agrawal, Deputy Mayor of London for Business. Other major Masala Bond issues at the London Stock Exchange include IREDA's Masala Bond in 2017, the first green Climate Bonds Certified and investment grade rated bond by a financial institution; NTPC's listing in 2016, the world's first Indian green Masala Bond and first Masala Bond by a quasi-sovereign issuer; and HDFC's 2016 listing, the first Masala Bond by an Indian corporate on London Stock Exchange. A Masala Bond is a rupee-denominated bond issued to overseas investors and are settled in US Dollars and are typically subject to English law. London Stock Exchange said its International Securities Market (ISM), launched in 2017, has been designed to meet the demands of issuers and investors to improve the effectiveness and competitiveness of the UK primary debt markets, providing greater choice for a variety of fixed income issuers.

Last year, the London Stock Exchange Group (LSEG) had announced a memorandum of understanding (MoU) with the National Stock Exchange of India (NSE) to cooperate on dual listings and the launch of LSEG offerings in India. London Stock Exchange said the MoU is aimed at working together with NSE on creating a dual listing route for Masala Bonds and explore the launch of ELITE, LSEG's business support and capital raising programme for private high-growth companies, in India this year. Vikram Limaye, MD & CEO of NSE, said: “Dual listing of Masala bonds would enhance visibility, increase liquidity in secondary markets and enhance efficiency of price discovery for Masala Bond issuers. This would also reduce the cost of raising capital for all issuers and encourage the participation of a wider variety of issuers in the Masala Bond market. “NSE has focused on developing an ecosystem where SMEs [small and medium enterprises] can showcase their growth stories and launched EMERGE platform for SMEs in India to raise equity funding. By jointly launching ELITE in India, we aim to enhance our offerings for SMEs by providing training, support and capacity building for these growth companies. ELITE will bring a more in-depth and formalised process to help SMEs scale up their businesses and integrate them with the global ELITE community.” Together, LSEG and NSE will look to provide a route for Masala Bonds listed on London Stock Exchange to be dual listed on NSE's International Exchange, NSE IFSC Limited in Gujarat International Finance Tech (GIFT) City. Similarly, Masala Bonds listed on NSE IFSC in GIFT City will be dual listed on London Stock Exchange.