Market opportunity: Indian (green) bond issuance in EUR

2 minute read

There are now two liquid bonds denominated in euros emerging from the Indian market.

We review the Power Finance green bond that came in mid-September and argue that the market could take more supply. A recent green bond issuance on behalf of Power Finance Corp highlights a great opportunity for Indian corporations to issue in euro currency, and for euro investors – when more supply comes – to take positive exposure to a key geography for global climate change and the energy transition.

The bond was issued in mid-September and is only the second domestic Indian issuer bond having been issued in euros in modern times. It priced as ms+200 and is trading at z+182 (yield 1.76%) at the time of writing; as a market indication, Xover widened ~2bp during the same time. Even after having tightened that significantly in the secondary market, the bonds still trade relatively wide to many other issues in the same rating category.

Reviewing other issuers in the green segment and same rating category, we see a high concentration in the real-estate sector, which should mean decent diversification benefits from non-real-estate based issues such as POWFIN.

Demand for green funding in India meeting the pent-up demand for higher-yielding paper in the euro green bond market sounds like a potential blockbuster.