As the Indian renewable energy market heats up with new and bigger projects being announced every week, private and public sector financial entities are looking to raise fresh funds to cater to the increasing demand.
The Indian Renewable Energy Development Agency (IREDA), the primary government-sector entity that is responsible for disbursing loans and subsidies to renewable energy projects in India, has floated a fresh bond issue to raise Rs 1,716 crore (US$260 million).
While IREDA has not branded it as a green bonds issue, all proceeds are expected to be used for facilitating renewable energy projects across India. The Agency recently reported that it expects to disburse Rs 3,600 crore (US$550 million) in loans to project developers in FY2015-16, significantly higher than the total disbursement in FY2014-15 of Rs 2,600 crore (US$400 million).
The funds raised from the latest bonds issue is expected to increase the total funds raised by IREDA to Rs 2,000 crore (US$300 million) this financial year.
The bonds issue has received tremendous response from investors. On the first day of the issue, the bonds were subscribed five times over, with investors willing to pour in Rs 5,092 crore (US$780 million). One of the reasons for such positive response is that interest rates in India are expected to fall over the next few months, which will also impact rate of return on debt instruments.
IREDA is offering bonds to retail investors at 7.53% to 7.74% for a duration of 10 to 20 years; these rates are higher than what some Indian banks are currently offering on debt instruments. Another attractive aspect of this bond issue is that the interest earned will not be taxed.
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