Informist, Wednesday, Jul 10, 2024

--Sources: Canara Bk to raise up to 100 bln rupees via 10-yr infra bond

--Sources: Canara Bank likely to tap mkt with infra bond by next wk

By Sachi Pandey

MUMBAI – State-owned Canara Bank plans to raise up to 100 bln rupees through infrastructure bonds by early next week, sources in the know told Informist. This could be the bank's first infrastructure bond issue in the current financial year.

"The bank was supposed to hit the market on Tuesday itself, but there are some mandates still pending," a source closely involved in the transaction told Informist. "Essentially, it should be uploaded by this week, but they still need to conclude a few things."

According to sources, the bank is likely to issue infrastructure bonds maturing in 10 years. However, the base size and greenshoe option for the issuance have not been finalised yet.

Market participants expect the coupon on Canara Bank's infrastructure bonds to be 7.30-7.40%. "There is demand definitely, but there are many infrastructure bonds lined up, so if any other bank comes with their issuance before, then that might be a challenge to secure good levels," the source said.

In the financial year ended March, Canara Bank had raised a total of 100 bln rupees through two tranches of infrastructure bonds maturing in 10 years each, at coupon rates of 7.54% and 7.68%.

Earlier this week, CRISIL Ratings and CareEdge Ratings assigned an 'AAA' rating on Canara Bank's 100-bln-rupee infrastructure bonds, the bank informed exchanges.

Several other banks are lining up infrastructure bond issuances to meet their funding needs amid rapidly growing balance sheets and tightness in deposit mobilisation. On Jun 26, State Bank of India tapped the market with its first infrastructure bond in the current financial year. The lender raised 100 bln rupees through infrastructure bonds maturing in 15 years at a coupon of 7.36%, and bagged the lowest-ever rate of interest for infrastructure bonds issued by a bank.

SBI is now set to tap the market with a second tranche of infrastructure bonds today. It will seek bids for 100 bln rupees of infrastructure bonds maturing in 15 years.

ICICI Bank also raised 30 bln rupees through infrastructure bonds maturing in 10 years at a coupon of 7.53%.

Market participants expect the supply of such papers in the primary market to increase in the coming days, with Bank of Baroda and Bank of India likely to raise funds through such bonds.

Banks and financial institutions issue infrastructure bonds to finance long-term infrastructure projects with a minimum maturity period of seven years. Funding projects through infrastructure bonds is usually cheaper for banks, as these are eligible for some regulatory dispensation.

At 1050 IST, shares of Canara Bank were down 1.5% at 114.33 rupees on the National Stock Exchange. End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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