RBI approval on masala bond lead arrangers is awaited
THIRUVANANTHAPURAM: Kerala infrastructure investment fund board (KIIFB), the state’s prestigious infrastructure investment arm, will not hard sell its debentures by paying high interest rates, but would rather wait until it receives reasonably priced quotes from institutions.
Talking to businessbenchmark.news, Dr KM Abraham, the high profile CEO and member secretary of KIIFB (seen in the picture), said some banks, who were keen to invest in KIIFB’s non-convertible debentures had sent bids seeking returns as high as close to 10 per cent.
“This is certainly very high given the profile of KIIFB, which enjoys high level of trust among institutional investors, thanks to the government guarantee and the innovative plans that it nurses on state’s infrastructure projects,” Dr Abraham said while talking to this news portal that exclusively focuses on Kerala’s business.
Dr Abraham said KIIFB has however re-launched the sale of debentures in the market again. “We are negotiating on the pricing with several banks and are hopeful that institutional investors, especially banks will soon come up with reasonable quotes,” he expressed hope.
It was a few months back KIIFB proposed the private placement of non-convertible, redeemable, taxable bonds of Rs10,00,000 each in the nature of debentures to raise Rs1500 crore with a Green Shoe option of another Rs2000 crore, taking the aggregate to Rs3500 crore.
Responding to a reference to the private placement of debentures in December last by UP Power Corporation Ltd that attracted a pricing of 9.75 per cent, Dr Abraham said, “I don’t want to compare UPPCL to KIIFB. I would say for certain that KIIFB is much more attractive than UP Power Corporation on investment terms.”
KIIFB was established through a statutory Act and hence enjoys the guarantee of the Kerala state government on all its fund raising programmes. There is an escrow mechanism in place to make sure that its borrowings are invested in most professional and responsible way.
KIIFB is busy finalizing plans to raise funds needed for the several ambitious infrastructure projects it has embarked on. While the pravasi chiti is all set to be launched by KSFE on June 17 (the funds thus raised will be lapped up by KIIFB through bond sale to KSFE), KIIFB is waiting for the required approvals for its Rs5000 crore masala bonds.
Though Axis Bank and Standard Chartered Bank have in principle been finalized by KIIFB as arrangers of the masala bond (rupee denominated papers), to be listed on London and Singapore stock exchanges, the Board is waiting for the final approval from Reserve Bank of India (RBI).
“We hope that we would be able to launch this next month itself. But it is also important that we time it so as to tap a favorable rupee-dollar exchange regime, as the market will certainly factor in the exchange rate while investing in masala bonds, solely targeted on overseas investors,” Dr Abraham elaborated on the mechanics that determine the prospects of such bonds.
Though masala bonds are yet to catch up in Indian markets in a big way, let alone in Kerala, the good response received by bonds issued by National Highway Authority of India (NHAI) a few months back gives KIIFB enough hope.
KIIFB needs a lot of funds in the coming months and years as it has approved a total of 367 projects with a total investment of Rs22,051.39 crore. The Fund was established with the main objective of providing investment for projects in the State of Kerala in sectors like Transport, Water Sanitation, Energy, Social & Commercial Infrastructure, IT, Telecommunications etc.
Dr Abraham debunked the criticism against KIIFB for taking on huge infrastructure projects outside the budget. He said it was not uncommon in advanced countries to embark on strategic infrastructure projects outside the state/national budgets. “We have examples before us set by the most advanced countries such as UK and the US also.