India: IFC proposes to invest $150m in PNB Housing’s masala bonds

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The International Finance Corporation (IFC), the private investment arm of The World Bank, has proposed to invest up to $150 million in PNB Housing Finance Limited (PNB HFL) by subscribing to the latter’s five-year masala bonds, IFC said in a disclosure on Thursday.

Masala bonds are rupee-denominated bonds sold in offshore capital markets.

The investment proceeds would be used to finance retail buyers/developers of affordable housing as per the Pradhan Mantri Awas Yojana (PMAY) scheme and to developers of green buildings.

PNB HFL plans to raise up to $400 million through its maiden issue of masala bonds. IFC’s support to PNB HFL to pilot its maiden masala bonds issuance by acting as the anchor investor would help provide significant comfort to other investors for the balance $250 million, it said.

In addition, PNB HFL shall allocate an equal amount from its other resources of funds to create a pool of up to $800 million for affordable/green housing segments.

PNB HFL is a registered housing finance company listed with BSE. Currently, public sector PNB holds 32.96 per cent stake in the company, Quality Investment Holdings (QIH) holds 37.3 per cent while public shareholders hold the rest.

PNB had raised over Rs 1,315 crore through sale of shares representing 6 per cent of the equity in in PNB HFL in November last year.

“India does not yet have a vibrant affordable housing market. While the demand is huge, availability of financing and supply of stock is relatively very low. The problem could severely hamper the realization of the government of India’s goal of “Housing for All” by 2022.”

“In this respect, this initiative is part of IFC’s holistic approach to support both buyers of affordable housing as well as developers of such housing units as defined under the PMAY scheme,” IFC said.

Headquartered in New Delhi, PBN HFL has a pan India presence with a wide network of over 80 offices. Its assets under management stood at $9 billion as of December 2017.

Other Indian housing companies too have raised funds through issuance of masala bonds in the recent past.

In November last year, Housing Development Finance Corp. Ltd had raised Rs 1,300 crore by selling rupee-denominated masala bonds to IFC to fund its business expansion. In October, Fullerton India Credit Co. Ltd, an NBFC owned by Singapore-based Temasek Holdings Pte. Ltd, had raised Rs 500 crore ($76 million) from IFC.

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