India faces a steep challenge in transitioning to green energy, needing to more than double its renewable capacity and triple spending by 2030. But its buoyant renewable bonds hold out hope
India is still a long way from transitioning to green energy. To reach its target for 2030, the country will need to more than double its renewable energy capacity from the current 191 gigawatts. To achieve this the Indian government is dangling several carrots, including writing off interstate transmission charges for renewable generators to rev up the green energy sector.
However, according to a recent Business Times report, it would have to do a lot more to foot the hefty transition bill. For example, to get back on track to achieving its net zero commitment, the country will need to triple its spends on renewables by the end of the decade. Much of this cash must roll in from corporate credit and bank loans. Lately, the heft of offshore dollar bonds issued by Indian renewable companies has leapt up in the lucrative Asian markets.
These bonds offer a combination of relatively lower beta exposure and attractive yields. The average yield-to-worst for these bonds is 7.4 percent, which is higher than the 7 percent for similar-rated peers in Asia (excluding China property bonds), as well as higher than the 6.5 percent in the US and 5.1 percent in Europe.
India's strong economic growth adds to the allure of these bonds. The South Asian economy could grow by 6.8 percent this year, making it the fastest-growing among the world's major economies. In May, S&P Global upgraded its outlook on India's sovereign rating from stable to positive, citing the country's robust economic fundamentals.