HDFC Life, EPFO and SBI Life buy a chunk of IFC’s rupee bonds

MUMBAI: HDFC Life Insurance along with SBI Life and the Employees’ Provident Fund Organisation (EPFO) have lapped up India’s first rupee-denominated onshore bonds issued by the International Finance Corporation (IFC), a unit of the World Bank.

This is the first such offering issued in the last decade. India’s largest debt market investor EPFO has invested Rs 100 crore in 19-20 year maturities at about 9%, while private sector insurer HDFC Life and State Bank of India-owned SBI Life Insurance settled for Rs 150 and Rs 50 crore with 13-14-15-16 year maturities at 8.88%, three people familiar with the matter told ET.

Email and text messages sent to insurers seeking comment on the matter did not elicit any response till the time of going to press. An investment executive managing EPFO corpus, however, confirmed the development. It is not the quantum, but the interest rate from the triple-A rated international entity, which has triggered investment commitments from domestic investors. Those bonds are christened IFC Maharaja Bonds.

“With an unwritten support from the World Bank, IFC bond issues are sometimes perceived to be better credit quality than Indian sovereign securities,” said Ajay Manglunia, senior vice-president, Edelweiss Financial Services.

“From this perspective, the current issue with longer maturities offering up to 9% looks very attractive,” he said, adding that longer maturities tranches are especially good for domestic insurance and long-term investors. IFC will deploy the bond sale proceeds in infra projects in India over a period of time. Investors, who committed investments, will be issued fresh bonds as and when disbursement happens in those projects. The issuer is currently negotiating with different projects.

On Tuesday, they sold Rs 600 crore such bonds as part of their $2.5-billon programme to raise from India’s domestic market in the next five years. About Rs 300 crore was earmarked for longer tenures. India needs over Rs 1 lakh crore investment in infrastructure by 2017, according to the 12th Five Year Plan, which will boost the country’s growth.

IFC invested close to $380 million, or about Rs 2,300 crore, at current value to support the infrastructure sector in India during 2013-14. “This is perhaps after a very long period that IFC has given a positive spread over and above the sovereign bonds in any particular country. Normally, it prices it below sovereign rates,” said one of the persons cited above. “IFC has taken a 15-year India government bond as benchmark while pricing the long-tenure bonds.”

The government bonds maturing in 2028 are currently yielding at around 8.60%, 28-40 basis points above the IFC securities. “We take investment decisions faster than our rivals. Even though it is not a large amount, we couldn’t afford to leave such an attractive rate with high credit quality,” said the EPFO official, requesting anonymity.