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Top Masala Bond seller returns to market after govt relaxes tax norms

The market for masala notes, which are rupee securities sold abroad, may draw issuers at a time when liquidity is tight domestically

Aashika Suresh | Bloomberg 

Banks are going slow in purchasing bonds ahead of the Union Budget

India’s biggest issuer of sold the first masala note by a local company in half a year, after the government relaxed taxation on overseas borrowings and the Indian currency rebounded in recent weeks.

Housing Development Finance Corp. raised five billion rupees ($70 million) via a sale of five-year 8.75 percent notes, it said in an exchange filing. That was higher than the coupon of 6.73 percent the nation’s largest mortgage lender offered when it previously sold masala debt a year ago.

The firm is returning to the after India’s Ministry of Finance withdrew tax payable on in September, in an attempt to attract foreign investment to boost Asia’s worst-performing major currency. The rupee has recovered since October but has still weakened 10.5 percent this year, weighed down by the increase in crude oil prices and a wider emerging-rout.

The for masala notes, which are rupee securities sold abroad, may draw issuers at a time when liquidity is tight domestically. That’s a result of a surprise default by , an Indian shadow bank.

“There’s reasonably good appetite for now and we will raise more funds via this channel whenever the opportunity presents itself,” said Keki Mistry, chief executive officer at the company, in a phone interview. “Liquidity in local is still tight even though it has eased a little since the IL&FS fiasco.”

has raised a total of 101 billion rupees through since its first issue in July 2016, according to estimates provided by the company.

Dewan Housing Finance Corp. was the last Indian company to issue such notes, in April, according to data compiled by Bloomberg. issued from Sept. 17 to March 31 of 2019 shall be exempt from tax, under the government measure.

First Published: Tue, November 20 2018. 15:33 IST
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