Single entity to operate GIFT bullion exchange
The country’s first international bullion exchange is set to come up this year, International Financial Services Centres Authority (IFSCA) Chairman Injeti Srinivas said on Friday. A single consortium of market infrastructure intermediaries (MIIS) will operate the exchange.
Speaking at the bell-ringing ceremony to mark the listing of Indian Railway Finance Corporation’s (IRFC’S) $750 million 10-year bond at the India International Exchange (INX), a subsidiary of the BSE, at the GIFT City IFSC, Srinivas said regulations for the bullion exchange had been notified.
“The exchange will operate with a delivery-based model for allocated and unallocated bullion. However, there will be underlying security backing the unallocated bullion,” Srinivas said.
On the development, INX Managing Director and Chief Executive Officer V Balasubramaniam said a single entity owned by a consortium of MIIS would run the international bullion exchange.
“All MIIS, including BSE, NSE, MCX, NSDL, and CDSL, would together own this consortium. In principle, we have
taken this call and we are in the process of finalising the framework,” said Balasubramaniam, adding that the BSE would look to make INX a hub for participating in all the ventures within the IFSC.
Elaborating on the listing of the recently concluded $750-million offshore bond issuances under the $4-billion global medium-term notes (GMTN) programme, IRFC Chairman and MD Amitabh Banerjee said this was the fourth bond series issued by IRFC under the EMTN (Euro Medium Term NOTE)/GMTN (Global Medium Term Note) programme, which has been listed on the INX.
“As usual, the issuance of the bond has received an overwhelming response from investors around the globe, including a diverse set of investors based out of Asia, Europe, and the US. Bonds were issued in a single tranche at a margin of 167.5 bps over 10-year Treasury, pegging the fixed coupon rate at 2.80 per cent with a tenure of 10 years. The bonds issuance priced at 2.80 per cent is one of the tightest ones, achieved by an Indian CPSE in the 10-year segment in the recent times, as compared to the recent issuances undertaken by the peer companies. The pricing advantage derived by IRFC is in the range of 55 to 60 bps,” Banerjee said.
The bond issuance also carries a unique achievement of seeing a departure from the price convention accepted in the market. Instead of the bonds being priced at a premium over the secondary market yield, they were priced 7 -10 bps below the yield curve in the secondary market.
Elaborating on the benefit of listing the $750-million offshore bond issuances across multiple centres, including London and Singapore, apart from GIFT IFSC, Banerjee said that the move helped IRFC become a “known commodity in international markets”.
According to Banerjee, the current financial year alone will see IRFC provide over ~1.13 trillion funding to the Indian Railways, accounting for more than 70 per cent of the Indian Railways’ capex outlay, being touted as a record.
“This reflects IRFC'S critical role in augmenting the planned funding needs of the Indian Railways. IRFC'S share in the rolling stock asset fleet of the Indian Railways is more than 80 per cent. There has been a significant value addition by IRFC to the Indian Railways, as competitive rates and terms at which IRFC demonstrated through the most mobilises funds from the financial markets,” he added.