KIIFB to float masala bonds'

Thiruvananthapuram: With an outflow of Rs 10,000 crore expected this fiscal, KIIFB has decided to float ‘masala bonds’ in London and Singapore exchanges to mop up at least Rs 5000 crore. This was announced by finance minister Dr T. M. Thomas Isaac after the KIIFB Executive Committee held here on Wednesday.

The EC on Wednesday approved 68 projects with a combined investment of Rs 2042.13 crore. Now, KIIFB has approved a total of 367 projects with a total worth of Rs 22,051.39 crore.

Dr Isaac said that ‘Pravasi Chitty’, another aggressive fund mobilisation mechanism devised by KIIFB, will be launched in the third week of May, to coincide with the second anniversary of the LDF rule. Hope is, the ‘Pravasi Chitty’ will throw up a free float of at least Rs 10,000 crore, which can be used to fund KIIFB projects.

A ‘masala bond’, like spices from which it has derived its name, will be quintessentially Indian. Though it will be floated in a foreign country, the bond buyers will have to pay not in pound sterling or Singapore dollars but specifically in rupees. So, it goes without saying, the target is NRIs settled in London and Singapore. The advantage is, there will be no exchange rate risk like when one deals in foreign currency-denominated bonds. 

“The interest rate will also be relatively low because in Europe interest levels are generally low,” Dr Isaac said. Dull interest rates in European countries will also goad NRIs to invest in ‘masala bonds’. Singapore has been chosen because the city-state has an established track record as a leading platform for India's funding needs. Further, there is also a disapora with deep pockets.  Dr K. M. Abraham, the KIIFB CEO, said that the interest rate would be below 9.5 percent.

At the moment, he said that it was difficult to float a bond with an interest rate of less than 10.5 percent.

Axis Bank and Chartered Bank have been picked through tender proceedings to help KIIFB in floating ‘masala bonds’. Axis Bank, which is an authorised dealer of ‘masala bonds’, has been tasked with putting in place the necessary framework for issuing the bonds. Also, KIIFB has picked international rating agencies Fitch Rating and S&P Global Rating to do the credit rating.

HILL AND COASTAL HIGHWAYS: The most important project given approval on Wednesday is the Hill Highway project; Rs 878.49 crore has been sanctioned for 11 components of the project. The finance minister said that no land acquisition was required. A “free land surrender” policy applies to the Hill Highway. “Already 700 km of the Hill Highway is complete, and for the entire stretch land has been surrendered free by owners,” Dr Isaac said. “Owners have to realise that a highway will dramatically increase their land value in future. Keeping that in mind they should contribute to the overall progress of the state,” he added.

The north-south coastal highway is Isaac’s other pet project. “We will start work once we get a long stretch with a width of 12 metres,” Dr Isaac said. The ambition is to have a cycling track on both sides of the coastal track, which is envisaged as the longest in the country.  

Projects approved – Rs 22,051.39 crore

Projects tendered – Rs 3435.49 crore

Projects started – Rs 3050.93 crore

Projects grounded (for which tenders have been issued) – Rs 6000 crore.