NTPC staff at the launch of the masala bond at the London Stock Exchange
NTPC staff at the launch of the masala bond at the London Stock Exchange

Nearly 30 masala bonds have been launched at the London Stock Exchange but the one issued on Friday (September 9) by NTPC Ltd, an Indian government undertaking, has special significance because it is the country’s “first green masala bond”.

NTPC stands for National Thermal Power Corporation but since the organisation is now responsible for solar and wind energy as well, only the initials are used as its formal name.

The issue was oversubscribed and the equivalent of $300 million (£227m) raised in Indian rupees, all of which will go into the development of solar power.

“India is serious about renewable energy,” assured Kulamani Biswal, director (Finance) of NTPC Ltd in an interview with Eastern Eye.

The country wants to move away from coal-fired power stations but, according to Biswal, solar at present provides “less than one per cent” of India’s needs. This is expected to go up to “35-40 per cent by 2032”.

One factor in India’s favour is that “we have 300 sunny days a year”, Biswal pointed out.

Allowing Indian companies to raise money in rupees for infrastructural development protects them from currency fluctuations.

The 60 foreign investors who have bought into the green masala bond are promised an annual return of 7.375 per cent over five years.

“Where will you get that kind of return?” wondered Sangeeta Bhatia, NTPC’s general manager (Finance), who was also present at last week’s market launch. “Your pension funds (in the west) hardly give one-two per cent.”

The return is certainly very attractive, providing the rupee does not devalue sharply against the dollar. At the end of five years, the investor can repatriate the profits in dollars but at the exchange rate applicable at the time.

“We absorb the taxes,” Biswal added.

India is under pressure from western countries to switch to green energy faster than it feels able to do. It argues pollution is a cumulative process for which the west has been responsible. India has also drawn attention to the fact that power consumption per capita in India is miniscule when compared with the west.

To maintain development, India will depend on coal-fired power stations for decades to come. Also, coal is easily available. That said, India is pressing ahead with renewable energy generation – and the launch of the country’s first green masala bond is proof of that intent.

Prime minister Narendra Modi said India hopes to raise $1 billion (£760m) through green masala bonds – of this target, $300m has already been raised by NTPC. And successive Indian governments have said the country needs $1 trillion (£760bn) of investment in infrastructure over the next five years.

Biswal said: “NTPC’s green masala bond offering, with third party assurance and Climate Bonds Initiative certification, reflects our commitment to renewable energy in the times ahead.

“We are keen to tap a new and international investor base for our renewable energy programme and access offshore financing without the associated exchange risks, which we can achieve through this issuance on London Stock Exchange.

“We are also grateful to London Stock Exchange for guiding us through the process of listing and attracting international investors into the first green masala bond offering from India.”

London Stock Exchange plc chief executive Nikhil Rathi referred to a comment by former Reserve Bank of India governor Raghuram Rajan that the masala bonds had shown the international community had faith in the Indian rupee.

Issuing the masala bonds in London, asserted Rathi, “is a highly strategic development, opening up an additional channel of financing which I believe over the next 10-15 years will generate hundreds of billions if not trillions of dollars of financing for Indian infrastructure”.

“India has led the way through NTPC setting international standards by having the bond independently certified with all the disclosures and transparencies that investors have been demanding,” said Rathi.

“NTPC is setting a very high standard. It is fantastic to have the supplier of 25 per cent of Indian power here raising capital.

“NTPC’s landmark independently certified green masala bond listing, the first masala bond by an Indian quasi-sovereign issuer, represents another historic event for Indian finance.

“We are honoured to have been chosen to support NTPC access Rupee-based financing in London’s international capital markets, reinforcing India’s ambitions to generate 175GW of renewable energy by 2022.”

He added: “We are excited about continuing to build this market with Indian partners and authorities over the long term, underlying the success of the India-UK Financial Partnership.”

Also present was Alok Sharma, the minister responsible for India in the Foreign Office. He called the offering a “landmark – not one of us can mistake how important it is”.

He said: “We are starting to see a flow now of masala bonds. I am absolutely certain we will see many more.”

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