India to bring its debutante sovereign green bond
– Vinod Kothari | vinod@vinodkothari.com
This version: 31st January, 2023
Following the Sovereign Green Bond framework issued by the Govt of India, and in accordance with the calendar of events issued by RBI, the first tranche of the sovereign green bonds has been successfully issued by the Govt of India. Remarkably, the bonds achieved a greenium of 6 basis points against the expected 2-3 basis points, with the issue selling at a 5-6 basis points lower yield than the sovereign yield of similar tenure. The issuance was more than four times oversubscribed. The five-year bond was priced at 7.10% and 10-year bond at 7.29%, as per the auction results released by RBI. Indian government bonds with the same maturity period were trading at a yield of 7.16% and 7.35%, respectively, during the relevant period.
After the launch of the Sovereign Green Bond framework in November 2022, India has made its fast move for debuting with a Rs 16,000 crore green bond issuance, in two tranches, in January and February 2023, according to an RBI announcement. The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy. The details of such projects are not immediately available; however, going by settled Green Bond Principles , which has also been adopted by India’s own sovereign framework, these projects will be identified and ascertainable disclosed by the issuer in the offer documents[1].
The GoI green bonds will qualify as SLR securities. They will also be available for investment by non-residents on automatic route. There are two maturities – 5 years, and 10 years, each with a value of Rs 8000 crores.
Green bonds are a part of a larger category of sustainability finance instruments, including social, sustainability, transition or other various thematic bond issuances. Green bonds constitute the largest components of the so-called GSS+ bonds.
Green bonds are issued by financial sector entities, direct users as also by sovereigns. The issuance by sovereigns, such as the Government of India in the present case, is fair recent – Poland is said to be the first country in 2016 to have issued a green bond.
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