Foreign investors latched onto a green bond issued by Adani Green Energy, a leading renewable energy company in India. Despite the poorly rated paper, investors flocked to the bond issue.
Adani Green Energy, a subsidiary of Adani Enterprises, successfully raised $362.5 million through a green bond issue. The company offered a coupon rate of 4.625 percent and a 20-year maturity. According to media reports, this is the first green bond issued by an Indian entity with a maturity period of 20 years.
The coupon rate was attractive to both investors and Adani Green Energy. The coupon rate was lower than the latest benchmark rate announced by the Reserve Bank of India, but higher than what foreign investors have access to in the western markets. Investors like PIMCO and Fidelity subscribed to the bond issue and offered to invest more than US$2 billion. This is despite the lowest investment rating of BBB- assigned by S&P to the bond issue.
There could be several reasons for investors to take the risk with this bond issue despite the uninspiring rating. Adani Green Energy is among the largest renewable energy companies in India. The company has footprint in solar and wind energy project development. Additionally, it is also India’s largest solar cell and module manufacturing company. The company have renewable energy projects operational in 10 Indian states and actively bids in state and federal auctions apart from engaging in acquisition activities.
Adani Green Energy also enjoys a rich parentage in the form of Adani Enterprises, a large conglomerate operational in multiple sectors including real estate, mining, finance, port logistics, and agribusiness.
Long-term commitment by the Indian government towards renewable energy could be another major reason for the high interest of foreign investors. Last month, the Indian Prime Minister committed to 450 gigawatts of non-fossil fuel power generation capacity by 2035.