IRFC – the beginning of a green era

Abstract

Learning outcomes The learning outcomes of this paper is as follows: to review the basic differences between the two evolving bonds, i.e. green vs masala bonds in the Indian capital market; to comprehend the factors that need to be considered in deciding the type of bond to be issued; to assess complexities, such as process, timing, risk and location in relation to the issue of the green bonds; and to understanding the rudiments of bond economics, such as pricing, all-in-cost and yield-to-maturity of bonds and make a comparison of all-in-cost of the Reg-S bond and green bond to Indian Railway Finance Corporation (IRFC). Case overview/synopsis In September 2017, IRFC, a public sector undertaking registered as a Non-Banking Finance Company with Reserve Bank of India under the administrative control of the Ministry of Railways, was planning to raise US$500m 10-year green bonds from investors in Asia, Europe and the Middle East. The green bond proceeds were proposed to be used for low carbon transport and in this way, contribute significantly to the green initiatives of the Indian Railways. Many companies in India had issued regular bonds without labeling them as green but had used the proceeds of the bond for climate-aligned assets. Therefore, a bigger challenge before the IRFC management was the economics of green bond for getting a nod from the Board of Governors to go ahead. Some preliminary estimates on cost of green bonds were received from few bankers but to see that the terms of green bonds are met eventually, the Director (Finance) developed his own estimate of the cost of the new bonds. The Managing Director and Director (Finance) of IRFC were trying to figure out the economic advantage of green bonds besides its social benefits. Complexity academic level MBA Programme Executive Training. Supplementary materials Teaching notes are available for educators only. Subject code CSS 1: Accounting and Finance.

Green Bond as an Innovative Financial Instrument in the Indian Financial Market: Insights From Systematic Literature Review Approach

“…Also, at the country level, lack of awareness, the lower As outlined by Pereira (2021) there is limited scope for a promised innovation in a country in terms of project assessment and private capital due to the prioritization of infrastructure for achieving development. One of the critics is that many Indian companies had already issued regular bonds without labeling them as green though their proceeds were destined for green projects (Dash, 2021). Talking about the regulatory norms, even though India has established a separate policy called ''Issuance and Listing of Debt Securities'' by SEBI, there is a lack of consistent regulatory participation as these guidelines apply only to publicly listed firms.…”

Do bond attributes affect green bond yield? Evidence from Indian green bonds

“…However, significant attempts were made to convince the rationale for the lower yield for green bond investors by revealing the investor's high preference towards sustainability. Alongside, it is further jus-tified by the availability of its double-edged benefits such as financial and non-financial benefits (Loffler et Though the green bond is a new phenomenon in the Indian financial market, only a few organizations have issued green bonds, and most of the issued bonds remained non-green due to the absence of certification (Dash, 2021). Moreover, India's green bond market development is lagging as there exist multiple factors such as lack of awareness, poor credit rating, low country rating, and non-availability of financial benefits (Verma & Agarwal, 2020; Bhatnagar & Sharma, 2022).…”