London Stock Exchange: The Home for Offshore Indian Rupee Bonds

Discover London Stock Exchange’s market leading Masala offering

01 Offshore Indian Rupee Bonds

“ We will also increasingly raise funds in London’s financial market. I am pleased that we will issue a railways rupee bond in London stock market […] for this is where the journey of Indian Railways had begun.” Prime Minister Narendra Modi, press conference in London, 12 November 2015

India is forecast to be the fastest growing economy in the G20 in 2015/2016 and requires significant investment flows to sustain this performance. In fact the Confederation of Indian Industry has estimated that India’s economy will need USD 4.7 trillion investment over the next 5 years to achieve 7% growth per annum1. Financing requirements on this scale can in part be achieved by tapping into the deep pools of capital and international investor base of the world leading global financial centre in London. “Masala” bonds, as offshore rupee bonds are often called, can help

corporates and Public Sector Undertakings (PSUs) access large scale foreign investment without foreign exchange risk.

London Stock Exchange (LSE) is now the largest Masala bond centre globally2. Ever since the first Masala bond listing in London in 2007, we are firmly committed to developing long-term strategic partnerships with issuers to ensure the success of this financing stream and help Masala bonds evolve from a specialist to mainstream asset class.

1 CII study, September 2014, https://www.mycii.in/KmResourceApplication/42085.StudyonInvestment.pdf 2 by number of active bonds

London – leading the world in Offshore Rupee Bonds

“ Today, we have outlined a bold and ambitious vision for our strategic partnership, and the decisions we have taken today reflect our firm commitment to pursue it and the confidence to achieve it. Indeed, the outcomes today have shown that we have already taken our relationship to a new level.” Prime Minister Modi, joint press conference with Prime Minister David Cameron in London, 12 November 2015

Xavier Rolet, CEO of London Stock Exchange Group, shakes hands with Prime Minister Modi at Guildhall, 12 November 2015

03 Offshore Indian Rupee Bonds02 Offshore Indian Rupee Bonds

In 2014, the Reserve Bank of India (RBI) permitted the International Finance Corporation and the Asian Development Bank to issue offshore rupee-denominated bonds. Subsequently, in September 2015, the RBI finalised guidelines for issuance of offshore rupee-denominated bonds by certain Indian Corporates (Rupee Bond Guidelines) and significantly relaxed a number of restrictions applicable to External Commercial Borrowings (ECB) in foreign currency. Allowing companies to issue rupee bonds abroad in this way helps to address both pricing and currency risks and opens a window for rupee-denominated instruments to trade globally.

Building London’s leadershipWith eleven active Indian rupee-denominated bonds and a number announced, London Stock Exchange is developing its leading position as the largest global Masala bond centre. Early signs of success have already been seen in the shape of the IFC’s recent issuances in London across a number of maturities, with back-to-back investments in Indian energy and transport infrastructure projects in partnership with Axis Bank and YES BANK amongst others. Ten new Masala bonds were listed in London in 2014 and Supranationals, Sovereigns and Agencies (SSA’s) including the Inter-American Development Bank, European Bank for Reconstruction and Development and International Finance Corporation have become repeat INR issuers. Issuing in London ensures issuers are benchmarked against global comparators and can reach the broadest and deepest possible range of investors globally – a range not as accessible in more regional markets.

Green Masala bondsLSE launched the world’s first green Masala bond in August 2015 in partnership with IFC and YES BANK. LSE offers the most comprehensive set of green bond segments of any international exchange.

A commitment to supporting Indian issuersLSE stands ready to support first-time Masala bond issuers with India-dedicated resources, as well as the unique experience and network it has built up at the heart of the global financial community over the years. What’s more, due to their unique flexibility LSE’s bond markets can accommodate the debt listings of companies reporting in either Indian GAAP or IFRS. There is currently no need for Indian corporates to re-state accounts for Main Market listing3. Indian GAAP is and will also remain eligible for listing on the Professional Securities Market (PSM).

Honourable Minister of Finance Jaitley and Xavier Rolet, CEO of London Stock Exchange Group, 13 March 2015

Raising international profileWith companies increasingly competing for capital, a bond listing has taken on added strategic significance. Listing on LSE provides issuers with enhanced visibility and additional marketing opportunities, which can be further boosted by a Market Open ceremony together with extensive media coverage in the world’s most international financial centres.

Complementary time zonesWhile 70%4 of global secondary market bond trading takes place in London, London trades a few hours after the Indian market opens, so core price formation for Indian credit can remain in the Indian market. Consequently, a thriving Masala bond market in London will complement the Indian market, and will ensure efficient pricing for both large and small scale Indian issuers.

An improved and predictable listing process for Indian issuersThe rules governing the UK’s capital markets are based on European Union Directives governing listing documentation, eligibility rules, and ongoing disclosure norms. The UK debt markets’ high standards ensure credibility amongst the global investor base and the UK Listings Authority (UKLA) maintains a reputation for having a robust and balanced approach to implementing the listing rules.

“ As the first multilateral Masala issuer on the London Stock Exchange, IFC had a very positive experience working with the UK regulatory authorities over more than 10 transactions. The listing process was predictable and overall comparable to listing debt securities in other financial centres. Listing this bond in London has also enabled us to achieve greater visibility with global investors, a core objective for IFC when we raise capital.”t IFC statement, November 2015 ment

New opportunities for Indian Corporates

IFC Market Open, 19 August 2015

“ There is renewed vigour in the India-UK relationship and HDFC is delighted to announce its intention to list its bonds on London Stock Exchange. UK is the global hub for financial services and the Reserve Bank of India’s guidelines permitting overseas rupee-denominated bonds, will open up a new source of funding for us.” Deepak S. Parekh, Chairman, HDFC

“ We have also come up with the mechanism of tax free infrastructure bonds for projects in rail, road, and other sectors. We will work together with the British Government, industry, and the financial market to deepen our relationship and harness that interest in India’s infrastructure. Very soon, these bonds will become strong instruments for engagement between our financial markets.” Narendra Modi, Prime Minister of India

3 Indian GAAP is equivalent to IFRS until March 2016 4 TheCityUK, The UK’s Competitiveness as a Global

Financial Centre, August 2015

For more information, please contact the Fixed Income team

Telephone +44 (0)20 7797 3921

Email Lillian Georgopoulou, EGeorgopoulou@lseg.com or bonds@lseg.com

Website www.londonstockexchange.com/ specialist-issuers/debts-bonds/debts-bond.htm

04 Offshore Indian Rupee Bonds

“ Today we’ve discussed Prime Minister Modi’s vision for India, to transform its economy […] We want to become your number one partner for securing the finance needed for this ambitious plan, making London the world’s centre for offshore rupee trading.” Prime Minister David Cameron, joint press conference with Prime Minister Modi in London, 12 November 2015

Strong political support from the UK Government

A medium-term note (MTN) programme is an efficient way of listing debt securities. Under the umbrella of one base prospectus, a number of notes can be drawn down in a cost effective manner. MTNs are most similar to revolving credit lines as they enable issuers to take advantage of changes in market conditions and are a convenient cash flow management tool, allowing quick access to funds. For MTNs, UKLA approval is required for the base prospectus

Recent Masala bond news coverageHDFC announces plans to raise $ 750 million via Masala bonds:

www.economictimes.indiatimes.com/markets/bonds/hdfc-to-raise-750-million-via- masala-bonds/articleshow/49761158.cms

The world’s first Green Masala bond issued by IFC:

www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/ifc+issues+first+green+masala+bond+on+london+stock+exchange

Modi visit – a huge vote of confidence in London’s strengths as the international centre of finance:

www.standard.co.uk/comment/comment/george-osborne-a-new-era-for-britain-and-india-on-track-for-a-masala-bond-a3113856.html

Narendra Modi at Wembley – After James Bond, Brooke Bond, we go to rupee bond (video):

www.ndtv.com/india-news/after-james-bond-brooke-bond-we-go-to-rupee-bond-pm-modi-at-wembley-1243202?site=full

All bonds lead to London:

www.business-standard.com/article/finance/all-bonds-lead-to-london-115111600049_1.html

IRFC to raise Masala bond in London:

http://articles.economictimes.indiatimes.com/2015-11-10/news/68165234_1_indian-railway-finance-corporation-irfc-masala-bondsMasala bond statistics

LSE

Number of Masala bonds listed 27 (11 active)

Number of issuers 5 (3 active)

Capital Raised (GBP) 1,786,582,238

Active issuance maturities (from issue date) 10y, 5y, 3.5y, 3y, 2.4 y, 2y, 1.5y, 1y

Secondary market Eligible for order book trading, continuous market making, end-of-day pricing, trade reporting only

Average coupon across maturities (active bonds) 6.21%

Regulatory Authority UK Listings Authority

Average coupon 5y maturity (active bonds) 6.45%

Average coupon 3y maturity (active bonds) 6%

Listing fees UKLA charges a £2,750 vetting fee and a £1,100 eligibility fee (no extra application or annual fee). The fee for admission to trading on LSE is based on the face value of the security at the date of admission, up to a maximum of £4,200. LSE charges no annual fee.

only. Subsequent draw-down issues are allowed at any time during the 1 year validity period of the prospectus, subject to publication of Final Terms by 2pm the day before the issue. No fee is payable for setting up an MTN program on London Stock Exchange, and subsequent draw-down fees are calculated on a sliding scale up to a maximum of £3,650 per issue.

Medium-term note programmes

For more information, please contact the Fixed Income team

Telephone +44 (0)20 7797 3921Email Lillian Georgopoulou, EGeorgopoulou@lseg.com or bonds@lseg.comWebsite www.londonstockexchange.com/specialist-issuers/ debts-bonds/debts-bond.htm

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