Economic Times article "London Calling"
"London has become the leading international market for offshore rupee-denominated debt, so-called “masala bonds”, allowing Indian companies to raise money internationally without foreign exchange risk."
Nikhil Rathi, CEO, London Stock Exchange plc & Director of International Development, LSEG, Suneel Bakhshi, CEO, LCH.Clearnet Group
In January 1698, a stockbroker named John Castaing pinned to the wall of Jonathan’s Coffeehouse in the City of London the first ever list of stock prices. Over the course of the last 315 years that list, and the investors and brokers who must have crowded around it, became the London Stock Exchange and today, as then, it is the world’s most international market.
London’s role as the pre-eminent global centre and gateway for international investment has been its calling card ever since. Indeed in 1698, an investor passing Jonathan’s Coffeehouse could have purchased “India Stock” for 53 and three quarter shillings. Today an investor would have the choice of more than 50 Indian companies to choose from, with a combined value of more than £100 billion (approximately 10 lakh crore rupees).
London’s role as the pre-eminent source of global capital for ambitious companies and countries is underlined this week by the landmark visit of Prime Minister Modi to the UK during which India and Britain are expected to sign trade deals worth up to £12bn. And as bilateral trade between our two countries is growing with the UK now the largest G20 investor into India, this trade is being underpinned by a developing long-term financial partnership.
This has been prompted by reforms spearheaded by Prime Minister Modi’s government and also by the need for substantial investment in infrastructure to support India’s remarkable growth trajectory. The World Bank estimates that the investment gap to be filled could be close to 10 per cent of India’s GDP and S.B. Nayar, Chairman of India Infrastructure Finance suggested that $750 billion would be required over five years.
International investors attracted to India’s growth story and looking for a stable regulatory environment can play a crucial part in financing Indian infrastructure. London is ready to act as India’s long-term partner in that regard, with significant steps being announced this week with the full support of the UK Government. Bharti Airtel, for example, signalled its intention to raise up to £500million through the London markets and Zyfin will launch the first ever London-listed, India fixed income ETF.
London has become the leading international market for offshore rupee-denominated debt, so-called “masala bonds”, allowing Indian companies to raise money internationally without foreign exchange risk. HDFC, under the leadership of Mr. Deepak Parekh, this week confirmed its intention to list the first ever offshore rupee bond by an Indian private sector corporate, a global first, raising up to $750m on the London Stock Exchange. This follows recent issuances in London by prestigious international financial institutions, such as the IFC, the investment arm of the World Bank, including the world’s first “green Masala” Bond.
The deals follows the visit of Indian Minister of Railways, Mr. Suresh Prabhu and Mr. Rajiv Datt, Managing Director of the Indian Railways Finance Corporation to London last week when they met global investors to discuss the international financing and green financing of India's railway infrastructure.
The green element to these and other major infrastructure projects is gaining global investor attention. We have seen in the last few months alone, new green securities being launched by organisations around the world from China to multinationals like Unilever, each taking advantage of a burgeoning pool of institutional capital invested through London dedicated to environmentally conscious investment
And Indian financial firms are taking note, with Indian banks making their mark in London. This week, YES BANK, India’s fifth largest bank, announced its intention to list up to $500m worth of green bonds in 2016, as well as using a global depository receipt programme in London to support its planned equity capital raising. YES BANK and London Stock Exchange have signed a Memorandum of Understanding to collaborate on bond and equity issuance for Indian corporates, including with respect to green finance. It’s a market and asset class for which we see enormous potential for cross-border collaboration
But it’s not just raw financing where India and the UK can work together. This week too, State Bank of India, India’s largest bank and already listed on the London Stock Exchange, announced that it would be working in partnership with FTSE Russell, part of LSEG and a global leader in indices, to develop a new Indian fixed income index and to launch a new investment product based on it in India.
Indices such as this are the tools that will build investment in India, helping to create deeper pools of international liquidity in the sovereign and corporate bond market. As Smt. Arundhati Bhattacharya, Chairman of State Bank of India said, despite investor appetite to access India’s ongoing growth story, Indian issuers’ bonds do not have a credible global benchmark for passive investment funds to tap the Indian growth story. The FTSE SBI Indian Bond index will be a catalyst, providing a yardstick for attracting these funds into Indian bonds, thus supporting the crucial secondary market.
While similarities between today and the era of Jonathan’s Coffeehouse remain, we’ve clearly come a long way since 1698. Most significant though we think, is the potential in the relationship between London and India; at a pivotal moment today. Like all relationships, for it to thrive will take continued focus and dedication by both parties but it is clear that there is the will on both sides to build for the future. As the deals struck this week and the tone of our two Prime Ministers highlights, we operate today in true partnership forged for mutual benefit.
This article appeared in the Economic Times on the 13th November 2015.