ReNew Power plans to raise $575 million in green bonds this year

Such fundraising by Indian companies has hit close to $5 billion in 2021 so far

ReNew Power is raising $575 million in green bonds, taking the issues of such instruments and loans by Indian companies so far this calendar year to over $5 billion.  

Unlike the last issue in early February, when the company raised $460 million through an “orphan subsidiary” model, which enables a foreign portfolio investor (FPI) to raise the money to invest rupee resources, this time the company is using five-six of its direct subsidiaries to raise the fund.

The tenure of the fund is a little unusual — 7.25 years, sources close to the deal said. The issue, though, is that there is no swap market in India for bonds with a tenor of more than five years. So, the direct hedging of the instrument could be a problem for the company. But the company has the option to roll over the swaps beyond five years, a source said. JP Morgan, Barclays, HSBC and Nomura are working as managers for the debt. 

The tenure is 7.25 years because the company wants to issue the bonds first and may come up with another follow-on offer within a quarter. After the re-issuance, the end result would be a bond with a seven-year maturity profile.

ReNew is not the only company active in the green bond market. In 2021, green bond issuances have seen a huge spurt compared to the past few years despite the pandemic. 

Besides, deal arrangers say most of the foreign funds are focusing on environmental, social, and corporate governance (ESG) lending, and companies are committing themselves to sustainable projects. 

“There is huge liquidity in overseas markets, but lenders are willing to lend if the borrowers manage to show certain commitment. It is a win-win for both and good for society as well,” said a senior banker engaged in raising funds for such projects.

In 2020, Indian companies raised about $10 billion from overseas markets in dollar bonds.

But in 2021 so far, including the upcoming ReNew Power bonds, the dollar green bond issuances from India have reached more than $5 billion, with a healthy pipeline.

Green funds are raised in rupees in India too. 

However, analysts say there is no proper green standard. If a bond or fund is certified “green”, it brings down the cost by almost half a percentage point. However, in the domestic market investors do not yet distinguish much between a normal bond and a green bond because of the lack of green standards, say bankers.

JSW Energy on Friday said its arm JSW Hydro Energy would raise up to $750 million in green bonds. Azure Power is also readying an upcoming green loan issue.  

The largest green loan issuance came from Adani Green, which raised $1.3 billion in March. 

Adani Group is planning to raise $12 billion in green funds in the next four-five years, raising $2-3 billion annually.