Larsen & Toubro mulls another ESG bond issue after debut attracts premium

Indian infrastructure major Larsen & Toubro could raise funds through environmental, social and governance bonds again, after its first-ever issuance of the notes was sold at a premium, a company spokesperson said on Wednesday.

In the debut bond sale under India's newly-introduced ESG debt securities framework, L&T on Wednesday raised ₹500 crore ($58 million) through three-year notes at a coupon of 6.35 per cent.

This compares with 6.45 per cent-6.50 per cent secondary market yields on the company's near three-year bonds, according to merchant bankers.

"We remain open to raising more funds through ESG-linked issuances...," the spokesperson told Reuters. "Should the need arise, and if market conditions are conducive, we may consider the ESG debt market again."

The notes, rated AAA by Crisil, saw banks and mutual funds as investors, the spokesperson said.

SBI Mutual Fund was the anchor investor and bought at least ₹75 crore of the bonds, bankers said. The fund house did not reply to a Reuters email seeking comment.

"We were able to achieve beneficial pricing on this ESG bond issuance compared to our plain vanilla bonds. The strong investor interest in credible ESG-labelled instruments helped us price the bond attractively," the L&T spokesperson said.