Thiruvananthapuram: Finance minister T. M. Thomas Isaac on Tuesday justified the state's decision to go for high-cost borrowing through the Masala Bond and offered to share its details with legislators.
He was speaking in the Assembly concluding debate on the debt instrument the Kerala Infrastructure Investment Fund Board (KIIFB) used to raise Rs 2150 crore from the overseas markets in rupee terms.
K. S. Sabarinadhan of the Congress raised the issue through a notice for adjournment motion, which the government agreed to discuss.
The opposition attacked Mr Isaac for the masala bond, giving the highest-ever yield, and alleged corruption in selling it to Canadian institutional investor CDPQ through private placement.
Mr Isaac admitted that it holds a substantial stake in the SNC-Lavalin, which is facing corruption charges back home. They limited their share to 19.9 and not 20 per cent as they did not have any intention of taking control of it.
He said the "government-controlled pension fund" managers has investments worth more than Rs 15.4 lakh crore in 68 countries, apart from SNC-Lavalin, including Rs 32,000 crore in India.
He said he had never claimed that the interest rate was low, but "the best available if the state wanted money immediately."
"Though attempts were made to mobilise the money from the domestic market, it was decided not to go ahead as the interest rate was 10.2 per cent. Though we tried again later, it was 10.25 per cent. It was only afterwards that the government decided to go for the masala bond.
Sovereign masala bonds of NHAI and NTPC had a lesser coupon rate of around 7.8 as they were rated higher. The KIIFB's rating is two or three notches below.
"Moreover, 9.72 per cent is not the rate for all the loans that KIIFB will source. The KSFE's float money that remains with the KIIFB when Pravasi Chitty subscribers withdraw their bids costs only 3.5 per cent and term loans from banks 8.5 per cent.
He said that top SEBI and RBI officials that the government had consulted said that the rate was fair.
On questions of Kannur Industrial Park not being part on the offer-circular, he said KIIFB had not granted sanction for the project then. It found a place in the second offer circular.
He also tabled the government order on the park.
Mr Isaac said that it was not a secret private placement. The government will make offer circulars for each country based on their rules.
The bid was restricted to institutional investors. As the government did not have an idea about Canada's interest until they approached them, they had to introduce an addendum to incorporate institutional investors in Canada.
"Listing the bond on the London Stock Exchange was not enough. KIIFB will have to convince investors of its credibility. For the purpose, KIIFB had to conduct road shows in various European countries to meet people and explain our strengths," he said.
He also said that he did not understand this hatred for SNC-Lavalin.
He told Mr Sabarinathan that it was his late father G. Karthikeyan who chose it as consultants for the renovation of Panniyar, Sengulam and Pallivasal and other hydroelectric projects as power minister.
