India's first blue bond draw nears as issuers line up, bankers say

Mumbai, India is on the brink of witnessing its first blue bond issuance as state-run financial institutions and local municipalities gear up to tap into the novel debt market, sources close to the matter reveal. Blue bonds, a term coined for debt securities earmarked to finance ocean- and water-related projects, are attracting investors with mandates to invest in environmental protection. Globally, over $15 billion in such bonds have already been issued by mid-2025, as per data from the World Bank.

Two entities are reportedly in the pipeline for the debut of India's blue bonds: Sagarmala Finance Corp, a state-owned maritime-focused lender, and Vadodara Municipal Corp, a municipal body located in Gujarat, India’s western state. According to L.V.S. Sudhakar Babu, Managing Director of Sagarmala Finance Corp, the lender aims to tap up to 10 billion rupees ($104.5 million) worth of blue bonds, with a tentative target date of late September for the sale.

The lender plans to finance projects that bolster India’s maritime ecosystem, including last-mile port connectivity, shipbuilding, inland waterways, and coastal road networks.

Vadodara, the hometown of Indian Prime Minister Narendra Modi, is in the process of obtaining approvals to proceed with a 2 billion rupee (approximately $26.5 million) issuance, according to two anonymous merchant bankers. These bonds would be used for capital expenditure on a pump house, a water treatment plant, and a clear water reservoir. India Ratings has granted "AA+" rating to the Vadodara bonds, which would be utilized for funding the aforementioned projects.

The municipal body in Vadodara did not respond to a request for comment from Reuters. Despite this, a large investor anticipates the Indian municipal bond market to at least double to $1 billion by the end of the financial year. Rajkiran Rai, Managing Director of National Bank for Financing Infrastructure and Development, expects fresh issuances of at least 50 billion rupees through March.

Over the past nine years, 22 cities across seven states have collectively raised around 45 billion rupees in municipal bonds, with 17.50 billion rupees raised in the last fiscal year alone. Rai expressed optimism about supporting most of these issuances.