Issuance of rupee-denominated green bonds by Indian companies is expected to pick up in fiscal 2024 as benchmark pricing is now available, with the government boosting sovereign green bond (SGrB) issuance.
Green bond issuances could touch 8-10 percent of total corporate bond issuances in India in a couple of years. This as India Inc and public sector companies are seen to take advantage of green financing at relatively lower cost to establish projects in areas like renewable energy, clean transportation, water and waste management/recycling, green buildings, solar energy on roofs, electric vehicles and electric vehicles. charging infrastructure, among others, according to experts.
“About 76 percent of green bonds issued in India since 2015 were denominated in US dollars…green bonds made up just 0.7 percent of all bonds issued in India since 2018,” according to a study published in RBI’s January 2021 monthly newsletter. .
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Ajay Manglunia, MD & Head, Investment Grade Group, JM Financial, expects the green bond market to rally, with some of the companies floating them in FY24, following enthusiastic investor response to SGrB’s inaugural issuance on the 25th from January. Green bond issuance could account for 2-3 percent of total corporate bond issuance in FY24. This could rise to 8-10 percent in a couple of years,” according to Manglunia’s assessment.
India Inc, on average, issues bonds worth ₹8-10 lakh crore per year. “There is a big market for green bonds outside of India. So if the domestic market for these bonds develops, it will attract foreign capital,” said the head of treasury at a public sector bank.
SGrB’s inaugural issue totaling ₹8000 crore on January 25 received a good response, with the five-year paper and the 10-year paper garnering subscriptions of about three times and five times, respectively, the reported amount (of ₹4000 crores each) .
Both stocks sold at a cut-off yield that was significantly lower (5-6 basis points) than the corresponding standard government stock on the fly. One more SGrB auction worth ₹8,000 crore is scheduled for February 9.
Attract FPI
RK Gurumurthy, Head of Treasury, Dhanlaxmi Bank, said RBI has made SGrB accessible under the fully accessible route (for non-resident investment). A stablecoin will certainly attract a fair amount of interest from foreign portfolio investors, he added.
Experts say that if the initial success of SGrBs is any indication, it could give a boost to green bond issuances by India Inc.
