Clipped from: https://www.business-standard.com/article/finance/axis-bank-in-talks-to-issue-10-year-infra-bonds-taps-insurance-firms-123012600410_1.html
Lender in talks with end-investors to issue infra bonds at a rate of around 7.85%
Private sector lender Axis Bank is considering issuing 10-year infrastructure bonds at a coupon of around 7.85 per cent, sources told Business Standard.
A coupon is the rate of interest paid out to investors purchasing bonds.
“They are looking for a 10-year infrastructure bond and discussions are on with end-investors. Some insurance firms have indicated interest and Axis Bank is considering issuing to the market too,” said a source aware of the developments.
“It may or may not happen before the Budget, some investors could be waiting for the Budget to get over (on February 1). 7.85 per cent is the kind of rate they are looking for. HDFC Bank’s tier-2 bond is getting quoted at around 7.88-7.90 per cent,” the source said.
The bond issuance would mark the first time in the current financial year that Axis Bank bank has tapped debt capital markets to raise funds through infrastructure bonds.
Sources said that the quantum of issuance could be as much as Rs 5,000 crore, depending on appetite showed by investors such as insurance companies.
“There was a meeting last week of potential investors where the matter was discussed. It would be a large issuance, at least around Rs 5,000 crore. The matter of pricing has been discussed at length,” the source said.
Earlier this month, public sector State Bank of India (SBI) had raised Rs 9,718 crore through the issuance of 15-year infrastructure debt on Wednesday, with the bonds bearing a coupon of 7.70 per cent. SBI, the country’s largest lender, had also issued 10-year infrastructure bonds worth Rs 10,000 crore at a coupon of 7.51 per cent on December 6, 2022.
Last month, private sector lender ICICI Bank raised Rs 5,000 crore through infrastructure bonds for funding projects in segments like power and roads. The coupon for ICICI Bank’s bonds was set at 7.63 per cent and seven-year maturity.
State-owned Bank of Baroda had also recently sold infrastructure bonds, reports said.
The issuance of long-term infrastructure bonds holds certain advantages for banks as these securities are exempt from computation of net demand and time liabilities (NDTL) – a proxy for deposits. Hence, they are not subject to cash reserve ratio (CRR) and statutory liquidity ratio (SLR) requirements.
Infrastructure projects aside, the money can also be used for loans to affordable housing ventures.
In FY22, Indian lenders including Axis Bank and HDFC bank raised over Rs 27,000 crore through infrastructure bonds.
Over the past few months, banks have aggressively sold bonds in order to raise funds as credit growth has far outstripped deposit growth. The bonds include additional tier-1 bonds, tier-2 bonds as well as infrastructure bonds.
As on December 30, bank credit growth was at 14.9 per cent while deposit growth was at 9.2 per cent, latest Reserve Bank of India data showed.
FIRST MOVE IN FY23
Bank considering issuing the bonds at a coupon of around 7.85%
This will be the first time in FY23 that the bank will raise funds through infrastructure bonds
Quantum of issuance — as much as Rs 5,000 crore — depends on appetite showed by investors such as insurance companies
SBI raised Rs 9,718 crore through 15-year infrastructure debt this week and Rs 10,000 crore through10-year infrastructure bonds
Over the past few months, banks have aggressively sold bonds to raise funds as credit growth has far outstripped deposit growth