Top Indian Banks Buy State Power Lender REC’s Tokenized Bond

Top lenders HDFC Bank Ltd. and ICICI Bank Ltd. are among buyers of India’s first tokenized bond offered by state-run REC Ltd., according to people familiar with the matter, signaling interest for such issuances that could help deepen debt market liquidity.

The New Delhi-based company raised 5 billion rupees ($52.9 million) by issuing notes due in May 2028 at a coupon of 7.30%, the people said, asking not to be identified discussing private information. About 20 investors, including banks, mutual funds and corporates, bought the bonds issued by the power financier, the people said.

Investors used the Reserve Bank of India’s digital currency for the transaction, they said.

The buyers included private lenders Axis Bank Ltd. and Yes Bank Ltd., the people said, adding that other subscribers were AK Capital Services Ltd., ICICI Securities Primary Dealership Ltd., Taurus Group and Trust Investment Advisors Pvt.

Tokenized bonds use blockchain technology for issuance, trading and settlement. The successful REC pilot could bolster efforts to deepen the corporate bond market by improving liquidity and transparency. Larsen & Toubro Ltd., India’s largest engineering company, is also seeking bids this week for three-year tokenized notes to raise as much as 5 billion rupees.

L&T didn’t respond to a query on its bond plan.

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The most significant potential benefit of tokenization is speed and settlement efficiency, said Amar Gandhi, founder and managing director at financial services-focused Taurus Group, which confirmed investing in and arranging the REC offer. By connecting tokenized securities with central bank digital currency-based payment, allotment and settlement can become significantly faster, he said.

AK Capital also confirmed its participation. HDFC Bank said it was one of the arrangers to REC’s issuance, but did not comment on buying the bonds. Axis Bank, ICICI Bank, ICICI Securities Primary, REC, Trust Investment and Yes Bank didn’t immediately reply to emails seeking comment.