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Debt Market: Bank of Maharashtra likely to tap debt mkt with tier-II bond by Jun end

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Debt Market

Bank of Maharashtra likely to tap debt mkt with tier-II bond by Jun end

This story was originally published at 20:40 IST on June 12, 2024  Back
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Informist, Wednesday, Jun 12, 2024

By Asmita Patil

MUMBAI – Bank of Maharashtra is likely to raise up to 10 bln rupees through Basel-III-compliant tier-II bonds maturing in 10 years this month, sources told Informist today. The bond issuance is likely to be the first from the banking sector in the current financial year.

The issue may have a base size of 2.5 bln rupees and a greenshoe option of 7.5 bln rupees. The bonds may carry a call option at the end of five years from the date of allotment. The bonds are rated "AA+" by CareEdge Ratings and ICRA.

In the past few months, rating agencies, including ICRA, have upgraded the rating of the bank's tier-II bond, citing improvement in its earnings profile, healthy loan book growth, and containment of slippages. The bank raised 7.74 bln rupees through tier-II bonds in 2023-24 (Apr-Mar), data compiled by Informist showed.

"They (the bank) did not issue much last year because the bank is very well capitalised, so they were not willing to compromise on the rate and take a higher amount," a merchant banker involved in the transaction said.

In 2023-24, the bank issued two tier-II bonds maturing in 10 years at coupons of 7.98% and 7.99%.

According to market participants, the bank aims to raise funds through tier-II bonds at a coupon of 7.85% this time. "The rating upgrade should bring their coupon down, but if they raise the full amount, the coupon will be in (the range of) 7.90-7.95%," the merchant banker said.

The bank's net profit jumped to 40.55 bln rupees in 2023-24 from 26.02 bln rupees the year before. The lender's Basel-III capital adequacy ratio was 17.38% as of Mar 31, up 53 bps from the previous quarter.

Bank of Maharashtra also hopes to raise 75 bln rupees capital by diluting a portion of the government's stake in the bank. The government currently holds around 86% stake in the bank.

Today, shares of the bank ended 1.33% higher at 67.27 rupees on the National Stock Exchange. End

Edited by Rajeev Pai

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