The UK, which is the single-largest investor in India among the G-20 group of nations, aims to become the most preferred destination for Indian companies looking to raise money overseas.
A delegation led by Harriett Baldwin, Economic Secretary to the Treasury, was in India last week, trying to convince Indian companies to raise capital in the UK through so-called ‘masala’ bonds. Masala bonds refer to rupee-denominated bonds issued by Indian companies to offshore buyers.
“We are very excited about the potential of the masala bond market in London,” Ms Baldwin told The Hindu on her maiden visit to India. “We want London to be the first point of call for Indian companies to expand and attract foreign sources of capital. The masala bond market has great potential to be an interesting asset class for investors and the UK government is keen to support Indian companies to this end.”
She said she received commitments from four Indian companies and agreements have been put in place but the timing of the bond issuance would depend on market conditions.
It is believed that Indian companies such as Bharti Airtel, HDFC, Yes Bank and Indian Railway Finance Corporation (IRFC) have agreed to raise money in the UK market.
During her week-long visit, the Member of Parliament from West Worcestershire constituency met Minister of State for Finance Jayant Sinha, Reserve Bank of India governor Raghuram Rajan, State Bank of India (SBI) chairperson Arundhati Bhattacharya.
She is also following up on some of the announcements that were made jointly by the Prime Ministers of India and the UK in November.
“My visit here is to follow up on financial services announcements, and on topics discussed at this year’s Economic and Financial Dialogue between the Chancellor of the Exchequer, George Osborne, and Finance Minister Arun Jaitley. There is already a great relationship between the financial services sectors of the two countries and I am exploring what more we can do together,” she said.
She is even trying to convince Indian companies to issue green bonds in the UK market, which has seen the quantum of money raised through such bonds grow nine-fold between 2012 and 2014. “Green finance is another area where we have had a lot of discussions… We encourage Indian companies that may be looking at projects, such as those for renewable energy, to raise money in the UK through green bonds. There are pools of capital that particularly want to invest in these kinds of structures. London plays a key role in bringing together such investors and projects. More and more pension funds are now looking at such investments too,” said Ms Baldwin.
Incidentally, the UK has had 10 masala bond issuances since 2014 and a total of nearly one billion pounds was raised, including the world’s first ever ‘green masala’ bond, which was issued by the International Finance Corporation in London.
Green bonds, as the name suggests, refer to bonds issued to raise money for a ‘green’ project like climate change, renewable energy, sustainable water or waste management or clean transport. In January, the Securities and Exchange Board of India (Sebi) issued the regulatory framework for issuance of such bonds by Indian companies.
According to Ms Baldwin, who was appointed Economic Secretary in May 2015, the UK wants to encourage two-way investments with India that “stands out as a bright spot” in the current global economy and it is unlikely that any global firm would not want to invest in India.
“India is an important economic bilateral relationship for the UK. We are very supportive of the Indian government’s moves to move up the ease of doing business ranks,” she says.
We want London to be the first point of call for Indian companies to expand
Harriett Baldwin,Economic Secretary to the
Treasury, UK
