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HDFC masala bond ‘a taste of things to come’

The Housing Development Finance Corporation (HDFC) of India launched a masala bond at the London Stock Exchange on Monday (1) in what is being interpreted as a gesture of confidence in the post-Brexit British economy.

So far, 30 off-shore rupee bonds have been listed on the London Stock Exchange but HDFC’s was the first by an Indian corporate, it was pointed out.


Deepak Parekh, chairman of HDFC, launched the masala bond alongside the Indian high commissioner Navtej Sarna, with the Foreign Office minister Alok Sharma, also present.

Sources revealed Parekh had, for a while, considered the virtues of Hong Kong but in the end decided to carry out the launch, with suitable razzmatazz and a sense of history, in London.

At the start of trading at 8am, footage was played of Indian prime minister Narendra Modi’s mention of the rupee bonds during his Wembley Stadium speech in November last year.

A rupee bond, which has been nicknamed the “masala bond”, allows Indian government undertakings or the corporate sector to raise funds off-shore in rupee denominations for the first time, thereby avoiding the uncertainties of currency fluctuations. In the past, this could only be done in foreign currencies.

India needs $1 trillion of investment in infrastructure over the next five years. Much of this money can only be raised abroad, with the British government hoping India will stick with London.

Sarna said he saw the launch as a reflection of the confidence others had in India, which has now overtaken China to become the fastest-growing major economy in the world.

HDFC has raised `30 billion (£340 million) and is promising investors an annual return of 8.33 per cent. “The listing of these bonds on London Stock Exchange gives us immense pride,” Parekh said.

“Besides being one of the largest stock exchanges in the world, London Stock Exchange has a rich legacy which dates back to over 300 years,” he added. “London Stock Exchange continues to distinguish itself by offering a wide range of financial instruments and enjoys unshakable trust from international investors. While we did explore other markets for listing, the responsiveness and efficiency with which officials responded to our urgent requirements was remarkable.”

He stressed the importance of the occasion by pointing out: “Considering that this was the first issue of its kind in a global financial centre by an Indian company, the authorities were forthcoming and supportive. We also appreciate the contribution and the speedy turnaround of the legal documents and the role played by the trustees, paying agent and the common depository.”

The launch was one of the few pieces of good news that the British government has had in the post-Brexit era.

Philip Hammond, the chancellor, was not present but he issued a statement welcoming the launch.

“I’m delighted HDFC has chosen to list this landmark bond in London,” he said. “It represents a major vote of confidence in London as the leading global financial centre and is further proof that Britain is a great place to do business.”

He went on: “This deal signifies a strengthening of the already close economic ties between the UK and India and paves the way for further masala bonds to be listed in the UK. It is a taste of things to come. Britain is open for business and one of the most attractive places in the world for foreign investment.”

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