L&T, IIFL Finance follow REC into India’s emerging tokenised bond market | Markets News
Larsen & Toubro (L&T) and IIFL Finance entered India’s tokenised bond market this week, days after REC completed the first such issuance, raising ₹500 crore and ₹25 crore, respectively.
L&T — the first corporate house to enter this segment — raised ₹500 crore on Wednesday at a coupon of 7.4 per cent via bonds maturing in three years.
IIFL Finance — a non-banking financial company — raised ₹25 crore at 9.1 per cent via bonds maturing in two years.
Trust Investment Advisors Private Limited arranged the IIFL Finance issue, marking the first time a non-PSU NBFC has raised funds through a tokenised bond.
REC issued a 20-month bond on Monday to raise ₹500 crore. The issuance drew bids worth ₹795 crore and was priced in line with rates on its existing bonds trading in the market, even though a mechanism to trade tokenised bonds does not yet exist.
Market participants said the bid size was a sign of investor demand at this stage of the rollout, which uses the Reserve Bank of India’s central bank digital currency (CBDC) for settlement and records holdings on Sebi’s Demat 2.0 platform in place of the depository ledger used for conventional bonds.
Tokenised bonds use blockchain technology for issuance, trading and settlement. The benefit of such instruments is speed and settlement efficiency.
Under the framework, private placement and allotment continue to run through the existing electronic book mechanism. Once allotted, the bonds sit in Demat 2.0, an extension of the demat system, while payments move through investors’ CBDC wallets linked to their bank accounts. Investors do not need to open a separate demat account or repeat know-your-customer checks, and coupon and redemption payments can be automated through smart contracts, market participants said.
With three issuers now having tested the framework, focus is shifting to whether it can extend beyond the group of investors currently taking part.
Market participants said liquidity, a mechanism for secondary trading, and a way to move holdings between conventional demat accounts and Demat 2.0 would be needed before tokenised bonds move past pilot transactions. The framework, which settles securities and payments on the same rail, is meant to cut down reconciliation delays in bond settlement, a step that will also require attention to cybersecurity, operational resilience and interoperability as adoption grows.
Source: www.business-standard.com