If India INX is able to launch, it will probably be the first in Asia to offer the Sharia-compliant debt-like securities
After masala bonds, euro bonds and the recently introduced green bonds, India International Exchange (INX), a wholly-owned subsidiary of BSE Ltd, is mulling to add Sukuk, or Islamic bonds, on its platform to attract companies which are constrained by the Islamic Sharia Law.
According to V Balasubramanian, managing director and CEO of India INX and chairman of India INX Global Access, said the idea is to slowly open up the market exchange to all segments and continuously broaden itself. "We are talking to a number of companies and once we could identify an issuer, we may add Sukuk as another trading instrument on our platform," said Balasubramanian.
According to him, London Stock Exchange is the only global venue for the issuance of Sukuk, and if India INX is able to launch it soon, it will probably be the first in Asia to offer the Sharia-compliant debt-like securities.
FRESH BONDING
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- If India INX is able to launch, it will probably be the first in Asia to offer the Sharia-compliant debt-like securities
- Average daily trading volume of India INX across all asset class in May 2019 has been over $1.56 billion
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A Sukuk is an Islamic financial certificate, similar to a bond in western finance, which complies with Islamic religious law, Sharia. Since the traditional western interest-paying bond structure is not permissible, the issuer of a Sukuk sells an investor group a certificate and then uses the proceeds to purchase an asset, of which the investor group has partial ownership. The issuer must also make a contractual promise to buy back the bond at a future date at par value.
The exchange, which was set up at Gujarat International Finance Tec-City (GIFT City) and commenced its trading activities in January 2017, expects to break-even in the next five years. The exchange currently operates for 22 hours a day to allow international investors to trade from anywhere across the globe. It offers a common platform for all asset classes – equities, currencies, commodities and interest rates. The exchange also offers a primary market platform for debt securities.
Last week, the exchange launched an exclusive platform for trading in green bonds with issuance and listing of $500 million green bonds of three subsidiaries of Adani Green Energy.
Balasubramanian feels there should be exclusive tax waiver for companies issuing on International Finance Service Centre (IFSC) at Gift City, as currently tax benefits on offshore-rupee denominated bonds are available to all issuers, meaning any company issuing on Singapore Stock Exchange or London Stock Exchange can get tax breaks in India.
"We want it limited to IFSC so that we can push our market," he said.
India INX has a 38% market share on equity index derivatives compared to the Singapore Stock Exchange in May 2019. There are 13 issuers on India INX with a total number of bonds listed being 35. Issuers are across a range of sectors viz. public sector banks, private sector banks, power finance companies, power generation and marketing companies, infrastructure companies, housing finance companies, etc.
It has witnessed an increase in its average volume from 70% to 85-93% recently. The average daily trading volume of India INX across all asset class in May 2019 has been over $1.56 billion.
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