* Multilaterals' rupee bonds returned 10.7% since November
* Volatility of the currency has dropped
* Successful transaction may prompt more supply
By Manju Dalal
SINGAPORE, April 11 (IFR) - In a week when a Triple C rated
sovereigns like Greece can offer sub 5% yield, the possibility
of getting double-digit returns on a Triple A bond may sound
like the start of a fairy-tale. Yet, in its drive to create new
funding avenues for Indian companies, the World Bank's
International Finance Corp has offered just that.
The multilateral lender has just priced a Rs12bn (US$194m)
seven-year Indian rupee-denominated bond to yield 8.25% in a
deal that topped out a US$1bn equivalent medium-term note
If the 8.25% recently offered seem enticing considering the
quality of the issuer, it pales in comparison to the return
already achieved by investors who bought the first issue of the
series, a three-year bond yielding 7.5% sold on November 18.
Since that date, the rupee has appreciated 3.2%, giving
investors a double-digit gain on one of the safest credits in
The bet could have easily moved against investors, though.
After years of stability, the seven-day volatility of the Indian
currency peaked in September last year at 42%. It has, however,
dropped back to its historic range of 3.4%.
"When we launched the programme in November 2013, we were
not absolutely sure of the response from investors as, at that
time, the markets were very volatile," said Monish Mahurkar, IFC
director for treasury client solutions.
"However, we are now very encouraged by the success of our
global rupee-linked programme. We plan to seek permission from
the Indian Government to extend the programme with a larger
limit," he added.
The sale of the first transaction off the programme was not
an easy one, the latest transaction was 140% oversubscribed.
"There are a lot of investors, who have mandates to buy only
Triple A rated paper and have no access to India," said Viral
Bhuta, Singapore-based portfolio manager at UTI International.
"The IFC deal bridges this gap."
The performance of IFC's bond may also encourage other
multilaterals to come to market with similar securities. Sources
said Asian Development Bank was planning an offshore rupee bond
Indian corporations are also examining the possibility of
rupee-linked bonds and would offer a much higher yield than IFC,
given they are are capped by the sovereign's BBB- rating.
IFC's securities are denominated in Indian rupees, but
settled in US dollars, with all principal and coupon payments
tied to the dollar-rupee exchange rate. The bonds also allow
investors to take exposure to India, without having to navigate
the country's byzantine foreign-investor regulations.
"There are many investors who would like to take India
exposure and, with Triple A rated IFC providing that, nothing
can be better," Bhuta said "How else can you get high
single-digit yields on AAA paper?"
(Reporting By Manju Dalal; Editing by Christopher Langner and