Modi's rupee bond plan for overseas Indians, mimicking China, "falls flat": Report

Modi at Wembley

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Prime Minister Narendra Modi's ambitious project to raise $1.5 billion from rupee bonds, about which he announced in London last autumn during his visit to London, has fallen flat. Top US business daily “Wall Street Journal” reports, “India’s attempt to diversify and deepen its corporate debt market has fallen flat, thanks to lack of demand and bad timing.”
“Despite Modi’s high-profile quips, plans to issue more than $1.5 billion from so-called masala bonds have yet to raise a rupee”, the daily says, quipping, “Last fall, Modi indicated to a gathering of 60,000 people at London’s Wembley Stadium that after James Bond, and Brooke Bond tea, a new type of bond was coming to markets: bond, rupee bond.”
Pointing out that the announcement to come up with the rupee bonds was made after looking for ways to help Indian companies take on more debt, invest and create jobs, the daily says, India's performance contrasts sharply with “Asia’s third-largest economy “, China, whom it tried to “mimic.”
China’s success yuan-denominated, “dim-sum” bonds “have raised more than $100 billion for Chinese and other companies since they were launched in 2007, according to data from Dealogic”, the daily reports.
”A global pullback from emerging markets, volatility in the rupee currency, and a tax on the issuance of these bonds has made them unattractive to both investors and issuers”, the daily says, adding, “India needs to diversify its debt load as its companies are overly dependent on bank lending, economists say.”
“India’s corporate bond market is smaller than 10% of the country’s gross domestic product. The corporate-bond markets in both China and Brazil are worth 40% or more of their respective GDPs”, it points out, adding, “Indian companies have been able to issue dollar and other foreign-currency bonds overseas for more than two decades but it wasn’t until September that selling rupee bonds abroad became an option. ”
Meanwhile, the daily reports, “Mortgage lender Dewan Housing Finance Corp Ltd., which recently concluded a road show to sell masala bonds, has put its plans on hold due to unfavorable market conditions”, quoting the company’s Chairman and Managing Director Kapil Wadhawan.
“Another lender, Housing Development Finance Corp. Ltd., has said it will revisit its plans to raise up to $750 million from masala bonds when the cost of issuing them comes down”, the daily says, adding, “State-run power-producer NTPC Ltd., and Indian Railway Finance Corp Ltd., which had planned to raise more than $500 million from the bonds, have also put their plans on hold.”
“The holdups are hampering India’s efforts to spread the use of the rupee as an international currency, diversify its source of funds and reduce its dollar liabilities”, the daily insists, even as quoting Lin-Jing Leong, an investment manager at Aberdeen Asset Management Plc, which manages $4 billion in Asian debt, ”The outlook for masala bonds 'is not very optimistic.”
By sharp contrast to the Indian plans, “Unrestricted by Indian regulations, global financial institutions like International Finance Corp., Inter-American Development Bank and European Bank for Reconstruction and Development, have issued rupee bonds outside India for more than a decade”, raising “around $3.8 billion offshore”.