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Use AI to improve upselling strategies by identifying relevant product combinations ✌️【Earnings】✌️Invest ₹500 and earn up to 100% monthly returns with our safe and reliable platform!While ECBs help Indian companies raise debt capital internationally by taking advantage of the lower interest rates in international markets, the cost of hedging the currency risk can be significant and has to be borne by the issuer — if unhedged, adverse exchange rate movements can have significant negative impact to the borrower and thus the “all – in” cost of borrowing through ECBs land up will be much higher than the international market rates.
However, in the case of Masala Bonds, as the currency risk is borne by the investor, the cost of borrowing can work out much lower compared with ECBs.The obvious two questions that come up are whether avoidance of the currency risk a significant advantage for the issuer and second if the currency risk is borne by the investor, what is in it for investors?To address the first question about the significance of currency risk, one should go back a few years, to around 2006–2007, when the Indian rupee was appreciating against the US dollar.
Use AI to improve upselling strategies by identifying relevant product combinations ✌️【Earnings】✌️Boost your savings with a ₹500 investment. High returns are just a click away!Based on this information and appreciation, as observed in the market, a number of Indian companies raised money through ECBs — particularly using Foreign Currency Convertible Bonds (FCCBs).
However, subsequent to the ‘Global Financial Crisis’ in 2008 and more recently the ‘Tapering Crisis’ in 2013 the Indian rupee significantly devalued against the US dollar causing huge distress to all those entities who had gone the ECB route to raise capital.
Use AI to improve upselling strategies by identifying relevant product combinations ✌️【Earnings】✌️Smart investing starts at ₹500. Grow your wealth through high-yield options!The 2013 Tapering Crisis was of great worry, as within three months the Indian rupee depreciated by about 15% causing huge losses arising out of the currency movements.Where is the edge?Now to the second question, given that the investor will bear the currency risk, what benefit entices the investor to invest in Masala Bonds? To make the bond attractive to the investor, the issuer offers a significantly high yield (coupon rate) — much higher than otherwise available in the market to compensate for the risk arising out of currency depreciation.
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For example, the HDFC issue offers an ‘all – in’ annualised yield of 8.33% per annum as against the average yield of just under 2% per annum of 10-year securities in the UK market.
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Interestingly, the demand for such bonds seems to be very high — the HDFC issue for example was about four times oversubscribed.Finally, what other impacts could Masala Bonds have that one should be cognizant of.
In a sense Masala Bonds can have impact on the Indian rupee value, the interest rates and the economy at large.Some benefits of Masala Bonds can be that international competition could hasten the development and maturity of the fixed income market in India, making the market more broad-based and active.
Further, if the Masala Bonds really become popular with overseas investors, then they can be a huge support to the Indian rupee.
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Use AI to improve upselling strategies by identifying relevant product combinations ✌️【Earnings】✌️₹500 is all you need to start your profitable journey. Invest today for high monthly returns!Too much of reliance on external debt (including uupee denominated) aided by the issue of Masala Bonds apart from the traditional ECBs can lead to serious negative impact on the sovereign ratings of India, and thereby creating a problem of attracting investments to India.In conclusion, Masala Bonds are a good idea to protect the issuers from exchange rate risks, but like anything else, overexposure to the same could lead to undesired adverse outcomes.Use AI to improve upselling strategies by identifying relevant product combinations ✌️【Earnings】✌️₹500 to start earning passive income with high monthly returns.