International Finance Corp launches Maharaja bonds

In talks to raise $2 billion through offshore rupee-denominated securities

The International Finance Corporation (IFC), a World Bank-backed development institution, has sold the first tranche of its 'Maharaja' bond, a rupee-denominated onshore debt instrument.

The issue has raised Rs 600 crore ($100 million) from foreign and domestic institutional investors. The funds will be used to invest in infrastructure projects in India. Investments under consideration include sectors such as renewable energy, roads, power and airports, said an IFC official.  

"This is the first time a bond issuance in the Indian domestic markets has been priced below the IGB (Indian Government Bond) benchmark yield curve," said an IFC statement.  The company's international AAA rating has helped it raise capital cheaper than the Indian government, it added.

FIRST TRANCHE

• The International Finance Corporation (IFC), a World Bank-backed development institution, has sold the first tranche of its Maharaja bonds, a rupee-denominated onshore debt instrument
• The issue has raised Rs 600 crore or $100 million from foreign and domestic institutional investors

The Maharaja bonds have been issued under a $2.5-billion programme to support the country's domestic capital markets. Earlier, IFC had issued a global rupee bond, which raised $1 billion from global investors.  

IFC is also in talks with regulators and government agencies to raise another $2 billion through offshore rupee-denominated securities said Serge Devieux, regional director, IFC, South Asia. A timeline for this is yet to be decided, added Keshav Gaur, global head Treasury Client Solutions-IFC, World Bank Group.

The bond has four tranches. The five-year tranche was subscribed twice over. The ten-year tranche was oversubscribed 1.3 times. The remaining two were placed privately with investors, said Gaur.

The first tranche is worth $25 million and matures in five years with a coupon of eight per cent. The second is also worth $25 million, and matures in ten years. It has a coupon of 7.97 per cent. Both bonds have raised money 50 basis points (or 0.5 per cent) cheaper than comparable IGBs.

There are also two separately tradable, redeemable principal parts (STRPPs), securities where the principal portion can trade separately.  These include callable bonds, which can be redeemed by IFC before its maturity. They have been priced 20 to 30 basis points (or 0.2-0.3 per cent) above comparable government bonds. The maturities of these instruments range between 13 and 20 years.  The coupons range from 8.88 per cent for maturities between 13 and 18 years and 9 per cent for maturities of 19-20 years.

The bonds will be listed on the National Stock Exchange, according to the IFC statement. The issue was managed by HSBC, ICICI Securities Primary Dealership and SBI Capital Markets.

IFC invested $1.2 billion in India in the financial year ending in March 2014. This included $380 million aimed at improving the country's infrastructure. "The innovative structure of IFC's Maharaja bonds enables us to efficiently connect savings from international and domestic investors to investments in infrastructure, while setting a triple-A pricing benchmark in the domestic capital markets that will pave the way for other high-credit issuers," said IFC vice-president and treasurer Jingdong Hua.

NSE Managing Director and chief executive officer Chitra Ramkrishna said such issuances would help create vibrant debt markets in the country.

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