State-run power companies will raise nearly $1 billion (roughly Rs 6,400 crore) through ‘masala bonds’ in the UK during this fiscal, minister for power, coal, renewable energy and mines Piyush Goyal said on Friday.
Masala bonds are rupee-denominated papers issued by Indian corporates in overseas markets to raise funds. Unlike dollar-denominated bonds, where the borrower takes the currency risk, investors bear the risk in case of masala bond.
The minister’s statement came in the backdrop of discussions on bilateral energy ties with his UK counterpart Greg Clark, who is also the secretary of state for business and industrial strategy. At the meeting, both the countries reaffirmed commitment to anchor investments up to £120 million (roughly $150 million) each in a joint fund, which aims to raise around £500 million (approximately $620 million).
Both sides agreed that the fund will focus its initial investments on India’s rapidly-growing energy and renewables markets.
Power ministry sources said state-run generation utility NTPC is expected to another Rs 2,000-3,000 crore to fund capital expenditure. The company was the first Indian corporate to float ‘green’ masala bonds in August 2016 for Rs 2,000 crore.
Power Finance Corporation too could be looking at raising another Rs 2,000-3,000 crore to fund expansion and modernization of the country’s transmission, distribution and generation infrastructure.
Other companies looking at offering masala bonds in UK include transmission utility PowerGrid, Indian Renewable Energy Development Agency, Solar Energy Corporation of India and Energy Efficiency Services Ltd. All of them together could aggregate a mop-up of Rs 1,000 crore or so.
But, all of this money is not going to be raised at one go. “These are independent entities and their board decides such issues. They will hit the market as when they deem fit,” a power ministry official said.
The first Masala bond was issued by the World Bank-backed International Finance Corporation in November 2014 when it raised Rs 1,000 crore to fund infrastructure projects in India. Later in August 2015, IFC issued ‘green’ masala bonds of over Rs 3,000 crore to fund private sector projects which address climate change in India. HDFC was the first Indian corporate to issue Masala bond, raising Rs 3,000 crore in July 2016.