K.M. Abraham, CEO of Kerala Infrastructure Investment Fund Board (KIIFB), has said that it is illogical to connect the Canadian company CDPQ's investments in masala bonds to SNC-Lavalin.
In a press release here on Saturday, he said the CDPQ was a government body in Canada, which in addition to being an institutional investor, also managed pension funds and insurance programmes.
‘‘From the annual report of SNC-Lavalin, it is seen that the CDPQ has business transactions with SNC-Lavalin. But SNC-Lavalin or none of the other institutions in which CDPQ has invested can have any ownership in the CDPQ as it is a government body. Hence it will be illogical to connect any of the investments of the CDPQ as part of its total portfolio of $220 billion, whether SNC-Lavalin or any other body, to the masala bond deal of KIIFB,’’ Mr. Abraham said.
He said the CDPQ made investments under the Foreign Portfolio Investor (FPI) or Foreign Direct Investment (FDI) regulations approved by the Centre. The CDPQ had also purchased 130 million worth of securities issued by the government. The CPDQ and the National Infrastructure Investment Fund Board (NIIF) set up by the Centre were in talks to partner in various infrastructure projects.
Regarding allegations on the high rate of interest, he said the rates at which the KIIFB had raised funds were much lower than what any institution such as the KIIFB had raised in the domestic market over the last one year.
The KIIFB masala bond has been issued at 9.723% rate of interest. Even for a AAA rated agency, the investors in the masala bond market bid for rates which range from 1.25-1.75% over the securities issued by the Centre. Considering these risks, the KIIFB with a BB rating has been able to obtain the best possible rate in the masala market when viewed against rates obtained by other institutions with a much superior AAA rating.
‘‘In comparison to the KIIFB’s masala bond rate of 9.723%, the rates obtained by bond issuers rated similar to the KIIFB in the domestic market for the last one year are significantly higher. The lowest rate at which an A+ rated entity has been able to raise fund in domestic market has been at 9.87%. A government entity such as the Andhra Pradesh Capital Region Development Authority (APCRDA) has raised funds in the domestic market at 10.32%. Rates at which other institutions banks such as the Central Bank (10.8%), IOB (11.7%) and the South Indian Bank (11.75%) have raised funds during the period are much higher,” he said.