International Finance Corporation (IFC), the World Bank’s private lending arm, has raised 3.15 billion rupees ($49.2 million) in its first green bond in the offshore rupee markets.
The offering was launched with the partial aim of funding India’s fourth-largest private sector lender Yes Bank’s renewable energy- and energy-efficiency projects.
IFC plans to invest proceeds from the issuance in Yes Bank's rupee-denominated bond, which offers a coupon rate of 8.95% over a 10-year maturity, according to two sources familiar with the deal.
Yes Bank offered its maiden green bond in February, a 10-year tenor that priced on February 24, carrying a coupon rate of 8.85 per cent. The Indian lender’s investment banking unit was the sole underwriter of this first foray into green bonds.
“Addressing climate change is a priority for IFC in India, and the green masala bond demonstrates the powerful role of capital markets in mobilising international savings to help close the climate finance gap,” Jingdong Hua, vice-president and treasurer of IFC, said in the statement. “Adding the rupee as a new green bond currency also supports our goals to strengthen this important assets class.”
Prior to these recent green bond offerings, five companies in Asia raised an aggregate $1.93 billion via green paper issuance so far this year, compared with $1.25 billion raised in the entirety of 2014, according to data provider Dealogic.
The nascent market for green bonds, named for the environmental nature of their financing goals, expanded exponentially in 2014, with policy banks and corporates raising a record $38 billion in the year.
Not bad for an up-and-coming instrument, perhaps, but a drop in the bucket when measured against government bonds from the US, EU, Japan and the UK of more than US$4.5 trillion last year, according to HSBC data.
HSBC noted increased public sector participation in the green bond market and expects larger size issuance by sector to boost liquidity in the market. Moreover, demand for green notes will be sustained because of the European Central Bank’s quantitative easing programme, HSBC said.
IFC’s latest bond sale, offering a coupon rate of 6.45 per cent annually over a five-year tenure, is part of a broader push to foster the country’s local currency offshore bond market and to fund Yes Bank’s loans for infrastructure projects in renewable energy and energy efficiency projects in the solar and wind sectors.
JP Morgan was the underwriter on IFC’s latest bond deal.
The IFC has sold US$3.8 billion in green bonds globally as of June 2015, including a Rmb500 million renminbi-denominated green bond in June 2014 – the first of its kind listed on London Stock Exchange.
In September last year, IFC raised US$2.5 billion from India’s onshore rupee debt market. It had been a decade since an international financial intuition raised onshore debt in the Indian currency.
The multinational organisation followed up in November with a $163 million masala bond issuance in London after the Modi government vowed to increase infrastructure spending.
IFC’s capital raising exercise in India is part of its $3 billion offshore rupee bond programme. Through the programme, the Washington-headquartered financial institution has sold more than 103 billion rupees ($1.66 billion) via a range of tenors, including November’s 10-year offering – the longest duration offshore issuance in 10 years.
