Government-owned firms buy over half of India’s first green-bond issue: traders
A LARGE state-run insurer and government-owned banks snapped up at least half of India’s first sovereign green-bond issue, said five treasury officials, including those with state-run banks and primary dealerships.
New Delhi raised 80 billion rupees (S$1.3 billion) via five-year and 10-year green bonds on Wednesday (Jan 25). It plans to use the proceeds for green projects, such as renewable energy, that help reduce the economy’s carbon footprint.
“We saw good demand from state-run banks and insurance companies, with the latter cornering one-fourth of the auction today,” said a senior treasury official at a state-run bank, requesting anonymity as the information was not public.
The Life Insurance Corporation of India was “an active participant and may have bid for around 20 to 25 billion rupees”, the official said, adding: “A similar quantum must have been bid by state-run banks.”
Traders said the large state-run insurance company’s purchase was focused on the 10-year paper, while state-run banks spread their purchases across both the securities up for offer.
The Reserve Bank of India (RBI) sold 40 billion rupees of five-year bonds at a coupon rate of 7.1 per cent, and a similar amount of 10-year bonds at a 7.29 per cent coupon. The bond yields were lower by 5 to 6 basis points than comparable government securities.
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The bids received were worth more than three times the amount for the five-year note, and nearly five times for the 10-year paper. The five-year bond was sold to 32 investors and the 10-year to 57 investors, central bank data showed.
Traders said that apart from state-run players, private banks as well as private insurance players showed interest.
The demand from insurers came after the industry’s regulator said earlier this month that insurance companies would be allowed to classify their sovereign green-bond purchases as infrastructure investments.
Meanwhile, participation from foreign investors was limited, confirmed traders with two foreign banks and two primary dealerships.
Foreign investors generally prefer investing in US dollar-denominated bonds for their green mandates, and that may have been one reason for their lower participation in the sale.
Ahead of the bond sale, the RBI had removed foreign-investment curbs on these securities.
Government officials were not immediately available for comments. REUTERS
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