About $4.1 Bn Coupon, Principal Payments Due In 2023 For India’s Green Bonds: Report

A total of USD 4.1 billion estimated coupon and principal payments due in 2023 for India’s green bonds, according to a report by Bloomberg LP released on Tuesday.

The estimated payments on outstanding green bonds in 2023 are 33 per cent more than in the past two years – a relief for issuers after the recent interest rate rises and sharp depreciation of the Indian rupee seen in 2022. 

The entry of sovereign and quasi-sovereign issuers has led to an increase in regulatory scrutiny of green bonds and the introduction of new products, such as green bond indexes and mutual funds, the BloombergNEF report said.

The report added that there were USD 42.9 billion in the issuance of labelled and unlabelled green bonds in the power sector from January 2014 to March 2023.

It added that 62 per cent is the share of the top five issuers of green bonds in India in 2022 and 80 per cent is the domestic power producers account for nearly 80 per cent of India’s green bonds from January 2014 through March 2023.

Green bonds play an important role in funding the growth of renewable energy in India, with almost USD 43 billion raised since 2014. Capital-intensive clean power projects, with stable and long-term revenues, are well suited for bond financing. 

Notably, the power producers are leading the issuance of these green debt instruments, and are also bringing innovation in their structuring. 

"The emergence of sovereign Indian green bonds has spurred regulatory reforms and catalysed new market products, which may broaden the investor base and bring in even more capital," as per the BNEF’s latest report.

India’s annual green bond issuance (labelled and unlabelled bonds), rose to a record high of USD 9.5 billion in 2021. ‘Unlabeled’ green bonds are those where the issuer is known to operate exclusively in the renewable energy sector, but the instrument is not certified as ‘green’. 

Green bond volumes in the power sector fell sharply in 2022, both for rupee-denominated and dollar-currency notes. A tighter monetary policy leading to higher bond yields and the depreciation of the rupee against the dollar caused the decline in 2022, it added.

The report stated that government issuers (IREDA, NHPC and NTPC) are more conservative in their green bond structures with a strong preference for medium tenors, fixed maturity and fixed coupon rates. 

"In contrast, private firms have issued zero-coupon bonds, written call options and linked coupon rates to lending rates or other external benchmarks," according to the report.