Informist, Monday, Jan 9, 2023
–Govt source: Expect sizeable “greenium” for maiden green bond issue
–Overseas investors showing interest for green bonds
–Local cos, insurers also keen on sovereign green bonds
–Identified projects worth 2-3 times green bond borrow
–See no extra borrow in current tranche of green bonds
–Govt source: Can double green bond borrow in Apr-Sep
By Aaryan Khanna
NEW DELHI – The government expects a substantial discount in yield for its maiden issuance of sovereign green bonds as investors have shown a renewed interest, a finance ministry official said.
“From what we have heard from investors, we are expecting a sizeable ‘greenium’ for these bonds,” the official told Informist. “We had not been getting very robust feedback initially, but recently that narrative has turned.”
“Greenium”, or green premium, refers to the pricing advantages of green bonds because investors are prepared to pay more or accept lower yields due to its impact on sustainability. The official did not specify how much of a discount in basis points, the Centre was expecting. The 10-year benchmark gilt yield was at 7.33% today.
The government on Friday released an indicative calendar for the issuance of sovereign green bonds under which it will borrow 160 bln rupees through such bonds in the five- and 10-year tenures in two tranches on Jan 25 and Feb 9.
The government expects bidding to be competitive as it spoke to over 50 overseas investors before the release of the calendar, the official said. Sovereign green bonds are eligible for the fully accessible route of investment in government securities. Indian corporate houses and insurers had also expressed interest in picking up the novel instrument, the official said.
The Green Finance Working Committee, headed by Chief Economic Adviser V. Anantha Nageswaran, has identified projects worth two-three times the amount being raised in line with the prescribed norms, the official said.
Only the “greenest green” projects are likely to be funded from the initial 160-bln-rupees being raised, but if any of them fall through, alternatives would be smoothly available on the basis of the most environment-friendly projects, the official said.
At the current juncture, the government is not looking at a greenshoe option as the amount being raised is
token and meant to gauge investor appetite for the instrument, according to the official.
“If this issuance goes according to plan, then we could look to double the borrowing through green bonds in the next half’s (borrowing) calendar,” the official said, referring to the gilt borrowing calendar for
Apr-Sep. “The ambit of projects it could be used for financing is only expanding.”
Edited by Vandana Hingorani
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