London’s reputation as the foremost global financial centre was reinforced when the world’s first ever “masala” or rupee-denominated bond issued outside India by an Indian company, HDFC, was listed on the London Stock Exchange.
It has a maturity of three years, an annual yield of 8.33 percent and was more than four times oversubscribed. The bond raised 30 billion Indian Rupees.
UK Chancellor Philip Hammond expressed his delight at this display of faith, especially after Brexit.
It represents a major vote of confidence in London 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.Hammond.
Earlier, if an Indian company raised money in the UK, it would be required to so in pounds and then convert it into rupees. When the bonds were redeemed, Indian companies would have to pay in pounds.
Currency fluctuation would therefore directly affect the company’s income. Being rupee-denominated, ‘masala bonds’ will not be affected if currency depreciates.
Investors in the UK who buy these bonds will now get better interest rates – currently set at 8.33 percent per year. This has attracted the interest of many Asian investors.
This development help HDFC to diversify borrowing and access global investors.
Taking advantage of the efficient listing process and tapping the global markets in London, global issuers can access a new vital channel of international finance and investors around the world without foreign exchange risk.Nikhil Rathi, CEO of London Stock Exchange
Deepak Parekh, the CEO of HDFC also expressed his appreciation for the responsiveness and efficiency with which the officials at the UKLA and London Stock Exchange responded to their questions.
There was excitement and applause as the large screens inside the London Stock Exchange played out the portion of Narendra Modi’s speech at Wembley stadium where he says:
“We have seen James Bond, Brooke Bond, now India is ready to offer the world Rupee Bond.”
(Source: NDTV, Business Line)