India’s corporate bond markets are set to flourish through newly structured funds attracting foreign investors worldwide. Investment opportunities once only accessible through banks or registration as a foreign institutional investor (FII) with the Indian regulator are now open to investors abroad wanting to buy Indian debt. Kotak’s recent launch of its fixed maturity plan has raised $140 million in three weeks from investors worldwide, indicating a genuine demand in India’s corporate bond markets.
Paul Parambi, head of the international business at Kotak Mahindra Bank, says Kotak hopes to generate yields of about 6.75% a year in rupee terms by investing in Indian companies rated AA/AAA by local rating agencies. These securities are held for a year with fixed returns.
Kotak has offices in the UK, US, Singapore and Dubai. The fund has sparked interest globally but in particular the Middle East and east Asia. This is because of the time frame of investment and regional proximity to India. Regulators may announce auctions for corporate debt within two weeks’ notice and bids have to be executed within 45 days.
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"We believe that there is a strong interest among foreign investors in investing in Indian debt" Paul Parambi, Kotak Mahindra Bank |
"The Indian regulators have set a cap of $15 billion on investment by international investors in Indian corporate debt," says Parambi.