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Canada province issues rupee-denominated bond, eyes India’s infrastructure sector

The Canadian province of British Columbia has become the first foreign government to issue a rupee-denominated bond, signalling its desire to play a role in India’s infrastructure development plans.

business Updated: Sep 02, 2016 14:15 IST
Anirudh Bhattacharyya
Canada
The move of issuing a masala bond follows the province’s earlier venture into a Chinese currency-denominated bond in 2013. It also issued a domestic bond in China in January. (REUTERS)

The Canadian province of British Columbia has become the first foreign government to issue a rupee-denominated bond, signalling its desire to play a role in India’s infrastructure development plans.

These are popularly known as masala bonds, and the BC government bond was placed on the London Stock Exchange where recently issued Indian masala bonds, by home-loan lender HDFC and public sector company NTPC, are listed.

In a statement, the province’s finance minister Michael de Jong said, “The masala bond issuance offers British Columbia a means to become well-positioned to profile our confidence in the outlook for India, and to participate in the internationalisation of the rupee and India’s economy.”

Canada’s high commissioner to India Nadir Patel welcomed the move, as he noted: “This bold move by the government of BC, to be the first sovereign government to issue a masala bond, highlights the confidence that BC and Canada are showing in the Indian economy. It reflects our strongly held view that India continues to improve its economic outlook under the leadership of Prime Minister (Narendra) Modi.”

The bond, with a three-year term, raised nearly Canadian $100 million on the London Stock Exchange, and is re-invested in another masala bond, issued by India’s Housing Development Finance Corporation Limited (HDFC).

This back-to-back issue, Patel said, “shows that BC and Canada continue to find imaginative ways to invest in India to help it achieve its core objectives of building needed infrastructure for this fast emerging economy”. 

“Furthermore this will increase Canada’s already substantial investments, estimated to be in the order of $15 billion in India’s infrastructure,” he said.

The move of issuing a masala bond follows the province’s earlier venture into a Chinese currency-denominated bond in 2013. It also issued a domestic bond in China in January.

The move also signalled how the province is looking at a role in India’s infrastructure development plans. “India is one of the fastest-growing economies in the world and is one of BC’s priority export market partners. We are delighted at the prospect of strengthening and expanding bilateral relations,” de Jong said.

HDFC chairman Deepak Parekh said in a statement: “We are pleased to know that the province of British Columbia has also successfully placed Rs 5 billion of Rupee Denominated Masala Bonds and utilised the proceeds to invest into HDFC’s Masala Bond Issue. This transaction is a landmark deal as it opens up a new market for sovereign issuers and investors.”

The bond comes ahead of an expected provincial trade mission, headed by its premier (the equivalent of chief minister) Christy Clark, later this year.