KIIFB’s masala bond raises Rs2150 cr

No details on pricing; first issue by a sub-sovereign from EM

THIRUVANANTHAPURAM: The Kerala Infrastructure Investment Fund Board (KIIFB) said on Friday that it had successfully completed its debut international issue by closing its Rs2150 crore Masala Bond issue.

“This is a landmark International debt capital markets transaction as this is not just the first offshore capital market issuance from a state level entity from India ever, but is also the largest dual currency issue by a sub-sovereign backed entity from the entire Emerging Markets (EM) and Asia,” a statement from KIIFB said.

It added that the transaction was priced on March 26, 2019 and saw strong participation from a wide spectrum of investors, which included asset managers, insurance companies, pension funds, banks as well as private wealth managers taking part in the issue.

However, no details on pricing were available from the KIIFB statement. There were views expressed by market observers that rating obtained by KIIFB from International agencies – S&P and Fitch being below investment grade, KIIFB may have to shell out high price to attract investment.

The Masala Bond market till date had seen issuance only from large Indian corporates and public institutions like NHAI and NTPC, which are all rated AAA in the domestic market.

“The successful closing of this deal is significant from this point of view and opens up new avenues for KIIFB. The deal is also significant for the state as the international investors have shown faith in a credit backed by a sub-sovereign from the emerging markets for the first time,” noted the KIIFB statement

Dr KM Abraham (seen in the picture), CEO, KIIFB said this landmark deal has shown the acceptability among international investors, the controlled leverage model of infrastructure financing championed by this government through KIIFB.

“This is issue has also helped showcase the unique strengths of Kerala in front of a wider global audience and help garner international investments to the state. This is a milestone transaction for Kerala Infrastructure Investment Fund Board (KIIFB) and for the State of Kerala. This transaction has realised our objective of diversifying our sources of funding by accessing capital from international investors. KIIFB strives to be at the forefront of creating a sustainable development model for infrastructure financing in the emerging markets and an exemplar for best practices in corporate governance and fund management.”

Sanjeev Kaushik, IAS, Deputy Managing Director, KIIFB and Principal Secretary, Finance, Government of Kerala, said this deal is significant for KIIFB as it would help diversify its sources of funding, and given the large mandate entrusted by the government, it was imperative for the Board to identify new avenues.

“The successful closing of this deal is also a recognition of fundamental robustness of the Kerala economy and the development model adopted by the state by international investors. This issue could act as a spring-board for future international issuances by KIIFB and also help the State in strengthening its connect with the global investment community and the NRKs living in different parts of the world,” Kaushik further said.”

Axis Bank and Standard Chartered Bank (SCB) were the joint lead managers for the Masala Bond issuance while DLA Piper and Cyril Amarchand Mangaldas acted as the international legal counsel and domestic legal counsel respectively.

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