L&T Plans Up to ₹500 Crore Tokenized Bond Issue After REC Debut

India’s Larsen & Toubro Limited (L&T) is set to venture into the new tokenized bond market in the country, where L&T is estimated to raise up to ₹500 crore in its first tokenized bonds offering this week. 

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The fundraising comes after the issuance of tokenized bonds worth ₹500 crore by state-owned Rural Electrification Corporation Limited (REC), on Monday, which was the first of its kind in India using corporate bonds issued through blockchain technology. 

L&T is expected to place its tokenized bond issue on an electronic platform for bidding. The bonds are likely to have a three-year maturity and are expected to be issued at around 7.40%, according to the Livemint report. The publication said an email sent to L&T did not receive a response until the time the report was published. 

REC Raises ₹500 Crore Through Tokenized Bonds 

The base issue size of REC was ₹100 crore, along with a green shoe option of ₹400 crore. The bonds have been issued with a coupon rate of 7.30%, which would mature by May 31, 2028. 

The RECs transaction is part of a larger initiative that is being worked on by the Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi) to experiment with tokenized corporate bonds. 

According to the model, the wholesale digital currency issued by the RBI is used for making transactions, and securities will be kept in a blockchain-enabled securities wallet known as “DEMAT 2.0”. 

Participation is currently restricted to investors who have active securities and CBDC wallets. 

How Tokenized Bonds Work 

Tokenized bonds remain conventional debt securities, but their ownership and transaction records are maintained using blockchain or distributed ledger technology. 

The underlying financial instrument remains a bond. This means the issuer continues to be responsible for making coupon payments and repaying the principal when the security reaches maturity. 

The key difference lies in the infrastructure used for recording ownership and processing transactions. Compared with traditional bonds that operate through established securities-market systems, tokenized bonds can allow digital recording and potentially near-instant settlement. 

What Tokenization Could Change in the Bond Market 

The technology has the potential to reduce settlement risk, improve transparency and automate certain parts of a bond’s lifecycle. 

Tokenization can also support fractional ownership, which could reduce the investment amount required to participate in corporate bonds and potentially open the market to a broader set of investors. 

At the same time, wider adoption will depend on the development of supporting infrastructure and a sufficiently liquid secondary market. 

Other state-owned financial institutions are also evaluating the possibility of raising funds through tokenized bonds, according to the Livemint report. 

With REC completing its first ₹500 crore issuance and L&T now preparing for a transaction of up to the same amount, blockchain-based issuance is beginning to find a place in India’s corporate debt market.