What kind of price band are you looking at?
That is left to market determination. However, as a premier international ‘AAA’ rated issuer, I am very confident that our bonds will be in great demand and the price will be extremely attractive. I cannot comment on pricing in detail, but this indeed is a game changer because nobody has done this before. We need to discuss with the arrangers and roadshows will be lined up shortly.
How do you see the investor demand?
IFC routinely issues bonds and we have plans to issue $15 billion dollar denominated bonds this year. So, we have an international investor base who are committed to buy our dollar bonds. It will be great to offer them the Indian bonds with high credit quality and give them exposure to India’s growth story. We will repatriate the proceeds to India market for economic activities onshore.
How does it work?
We raise money from foreign investors and on lend the rupee funds to the private sector in India which would focus on generating rupee revenues instead of borrowing in dollars and managing foreign exchange volatility. We have sourced rupee funds through swaps earlier, but this would be the first time we are tapping the bond route. We just issued bonds in Nigeria and Zambia. So, developing local currency market is good for the country, for the investors and for me as the Treasurer as I get to diversify investments.
Any particular sectors where these proceeds would be channelised?
IFC works with the Indian government to deploy proceeds in the priority sector. We are targeting poorest of the states where we need to address economic activities. Ultimately, the goal is to promote a vibrant private sector. At the end of the day, you need to create jobs in order to eradicate poverty. The sectors that promote job creation, building infrastructure, power, health care and agri-business would help expand the private sector. So, as of now we don’t have a destination in mind. Last year, we invested over $1.4 billion and our portfolio in India is the largest globally. So, we will continue the trajectory.
Is this the first step towards ‘internationalization’ of rupee?
I haven’t really heard of this before, this is something new and truly exciting. If I as the IFC Treasurer am looking at India, China and the US as top three economies by 2030, I would like to offer Indian rupee as the currency of IFC as routine as the US Dollar.
When does the subscription begin?
It is up to market conditions. This is a $1 billion bond that we will issue in tranches, depending on the investor demand. Hopefully, over the next couple of months, we should be rapidly able to issue several tranches.
How big could be the first tranche?
We are benchmarking offshore Indian rupee bonds with this issue, so a couple of hundred million dollars would be nice. Initially, the tenure could be 2-5 years and longer, going forward.