HDFC Becomes First Indian Company to Issue Masala Bonds (Download PDF)

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Housing Development Finance Corporation (HDFC) become the first Indian company to issue “masala bonds” on London Stock Exchange (LSE). Masala bonds are in the form of synthetic rupee notes. This bond will help to HDFC.

  • India’s biggest mortgage lender (home finance company) to spread its borrowing profile and access global investors.
  • During the current financial year with issuance of masala bonds, HDFC is planning to raise 750 million dollars from the foreign market.
  • As per applicable Reserve Bank guideline the synthetic notes are in the nature of ‘Rupee Denominated Bonds’.
  • Bonds will allow a fixed coupon and will have a tenor of three years and one month.
Image shows the Housing Development Finance Corporation bank

Image Shows the Housing Development Finance Corporation Bank

Showing image of Housing Development Finance Corporation bank

Background Detail:

  • In September 2015, to reduce the risk of borrowing in foreign currencies.
  • The Reserve Bank of India (RBI) had allowed companies to raise rupee-denominated bonds
  • Private and public sector companies have aligned plans to issue masala bonds.
  • Many company have planned to raise funds through masala bonds like:

    • State-owned NTPC
    • Indian Railway Finance Corporation (IRFC)
    • India Infrastructure Finance Company (IFC)

About Masala Bonds:

  • Masala bond refers to rupee-denominated bond borrowings by Indian entities to raise money from foreign markets in rupee and not in foreign currency.
  • Bonds are tools of debt that are normally used by corporates to raise money from investors.
  • Indian entity is protected against the risk of currency fluctuation and associated with borrowing in foreign currency by issuing bonds in rupees.
  • These Bond are help in internationalization of the rupee and in development of the Indian bond markets.
  • Masala bond are generally traded on the LSE and not in India.

- Published/Last Modified on: July 19, 2016

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