Kerala’s Communist chief minister Pinarayi Vijayan’s 10-day visit across Europe, beginning next week, will have one key stopover--the London Stock Exchange (LSE).
The event: The listing of a masala bond from Kerala Infrastructure Investment Fund Board (KIIFB), the only state-government body from India to issue the rupee-denominated offshore bond.
KIIFB’s masala bond was the brainchild of Kerala finance minister Thomas Isaac and KIIFB chief and former Securities and Exchange Board of India director K.M. Abraham. The board has raised ₹2,150 crore through masala bonds. Though KIIFB loans are guaranteed by the state, it does not come under the state government’s budget.
The overseas bond issue highlights how the Communists have adapted themselves and embraced many aspects of capitalism.
During his tour beginning 8 May, Vijayan will also visit the London School of Economics and attend the United Nations conference in Geneva on post-disaster reconstruction, wherein the Kerala floods will be discussed. The bond listing will be done on 17 May.
“This is a golden feather in the cap of Pinarayi Vijayan whose government prides itself on its focus on infrastructure and development," Abraham said in an emailed response to Mints’ queries. “The amount raised by KIIFB is the second largest mobilization ever done in the masala market by any public sector company from India. In absolute size, this is the third largest masala issue done by any Indian entity in the history of masala bonds, after it was approved by the RBI in 2016."
Darko Hajdukovic, head of fixed income, funds and analytics, UK primary markets, LSE, had recently said: “London Stock Exchange warmly congratulates KIIFB on its landmark debut masala bond. KIIFB’s bond highlights London’s status as a leading international financing centre, offering issuers access to the deepest pool of long-term international investor capital as well as best in class listing solutions."
“The issue was finally priced at 9.723% per annum. So far, only institutions which have been rated at AAA have entered the masala bond market. This is the first time that an entity like KIIFB with a rating of BB, below the rating of the central government at BBB-, has attempted a bond of this nature. The rate which KIIFB received is substantially lower than the current yield on the bonds by similar state government agencies even in the Indian domestic market," Abraham added.
The bond sale, however, has faced criticism locally, with the state unit of Congress party calling it a scam. Opposition leader Ramesh Chennitthla has objected to Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) buying the bonds as one of anchor investors, saying it has also invested in Montreal-based construction giant Canadian SNC Lavalin which is facing corruption charges. CDPQ is Canada’s second largest pension fund.