According to the most recent BloombergNEF data, domestic power producers made up close to 80% of the green bonds in India during the aforementioned time, with Greenko, ReNew, and Continuum being among the top five. The other two of India’s top five green bondholders are NHPC and Adani Green.
According to the most recent BloombergNEF report, Indian issuers raised branded and unlabelled green bonds totaling $42.9 billion in the power industry from January 2014 to March 2023. A bond is referred to be “unlabelled” when the company issuing it is acknowledged to only conduct business in the field of renewable energy but the product is not “green” certified.
Nearly 80% of green bonds in India during the time period were issued by local power providers, with Greenko, ReNew, and Continuum ranking among the top five. The other two of India’s most prominent green bond issuers are NHPC and Adani Green.
The research said that “more corporations are taking part in the green bond market” as the yearly percentage of the most prominent five issuers continues to decline for the third straight year.
According to the survey, the top five green bond issuers in the nation will hold a 62 percent market in 2022.
Other noteworthy points from the report’s section on “India Green Bonds” include the following:
According to the research, India issued $9.5 billion in market and unlabelled green bonds in 2021, a record amount. However, in 2022, both rupee- and dollar-denominated green bond sales in the power industry fell precipitously. The research stated that the fall in 2022 was driven by “tighter monetary regulations contributing to elevated yields on bonds and the depreciation of the rupee against the dollar.”
Up until 2021, medium-term bonds with maturities between five and ten years prevailed, but the next year shorter and longer-term bonds gained ground. The bonds with a set maturity date are the most popular. However, a number of bond issuers with call options—which allow for early redemption—were able to restructure their debt by taking advantage of the cheap borrowing rates in 2021.
Government issuers with more conservative approaches, including IREDA, NHPC, and NTPC, strongly favor medium tenures, set coupon rates, and fixed maturity in their green bond structures. The paper noted that private corporations, in contrast, have released explicit call options, and zero-coupon bonds, and have connected the rates of coupons to financing costs or other external benchmarks.
Remodeling was the most popular way to use proceeds in 2022, and this trend has continued since 2019. According to the survey, securities for general business purposes are growing in popularity, and issuers are also incorporating more information about the intended uses of the proceeds in their bond prospectuses. “The arrangement gives sponsors more autonomy in the application of their resources but could boost the impression of greenwashing,” it said.
The collective action clause was the one that bondholders favored the most. This permits collective action to alter a bond’s essential conditions. According to the paper, issuers frequently face limitations on their ability to distribute cash to holders in order to protect their interests, sell assets in order to preserve cash flow and merge with other entities in order to shield themselves from governance costs.
MUST READ – Launch of the Apple Vision Pro Headset: Can It Substitute iPhones?
After recent rate hikes and the steep devaluation of the Indian rupee in 2022, issuers will be relieved to learn that the anticipated reimbursements on extant sustainability bonds will be 33 percent lower in 2023 than in the previous two years. “The introduction of sovereign and quasi-sovereign borrowers has resulted in a spike in governmental scrutiny of green bonds and the emergence of novel offerings, such as green bond benchmarks and mutual funds,” the paper continued.
What are green bonds, and what function do they serve in the switch to sustainable energy?
Green bonds are securities and borrowings that are launched for the purpose of financing government debt and may be issued by the government or a firm. Investors purchase these bonds, similar to a regular debt instrument or traditional fixed-income investment, and in exchange, they give the issuer the required principle and earn interest when the bonds mature.
The manner in which green bonds vary from more traditional stocks is that the issuer guarantees to spend the funds collected exclusively for financing environmental projects.
The Ministry of Petroleum and Natural Gas would get Rs 35,000 crore in priority capital investments to support energy transition, net zero goals, and energy security, according to the Union Budget for this year. She then clarified that the funding designated for the security of electricity and transitioning is not an indirect subsidy. This money would be used to move from fossil fuels to renewable energy sources and to ensure that our strategic assets are fully stocked, she had stated.
In order to mobilize funds for green infrastructure, the government established an issuance schedule for Sovereign Green Bonds (SGrBs) at the beginning of this year.
In two installments, it is anticipated to fetch Rs 16,000 crore. According to the statement, the funds will be used for public projects that lower the economy’s carbon intensity.
The federal government auctioned its first SGrBs on January 25 for Rs 8,000 crore at returns lower than those of equivalent treasury bonds. A total of Rs 4,000 crore in five-year bonds with a rate for coupons of 7.1 percent and an additional Rs 4,000 crore in notes with a coupon rate of 7.29 percent were auctioned by the Reserve Bank of India.
