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India to debut with auction of green bonds at a “Greenium”

Jan 25, 2023

By: BlinkX Research Team

Indian government will be issuing its first tranche of green bonds with bond premium, popular called Greenium. The yields on these green bonds is lower than the conventional bond rates and it is this discounted yield that is called the Greenium. Government is targeting green bond collections of nearly Rs 40,000 crore from these green bonds.

The funds raised via green bonds will be used for green projects which cultivate the application of renewable sources like solar, wind and hydro. The fund raising will be done in a phased manner. It will raise Rs 8,000 crore in the current tranche and another Rs8,000 crore in the February 09th tranche. That will complete the green bond quota for FY23. The offerings will be sold in 5-year and 10-year tenors on 25th January 2023.

These funds raised through such green bonds will be given to Indian companies to meet their green initiative targets. They will be classified as sovereign bonds issued  by the government. India desires to nullify carbon emissions by 2070. In that direction, Greenium will help to push down yields on green bonds by 2-3 basis points below sovereign bonds.

However, things may not be all that smooth for the Greenium. Foreign investors have been wary of the Greenium, since the rupee has been depreciating against the dollar. So it is the currency risk and lack of domestic support that is likely to keep this sector on tenterhooks.