Canara Bank Mulls Raising Up To Rs 3,000 Crore With AT1 Bonds Issue Next Week
The issue has a base size of Rs 1,000 crore and a greenshoe option of Rs 2,000 crore.
Canara Bank is in talks to raise up to Rs 3,000 crore through the issuance of additional tier-I bonds, according to three merchant bankers with knowledge of the matter, in what can be called the first issuance by any bank in the current financial year.
The public sector bank has invited bids for its tier-I bond issue on Aug. 27. Bidding for this bond issuance will be on the National Stock Exchange's electronic bidding platform from noon to 1 p.m., they told NDTV Profit on the condition of anonymity.
The issue has a base size of Rs 1,000 crore and a greenshoe option of Rs 2,000 crore. The tier-I bond issuance, which is rated AA+ by ICRA, carries a call option on the fifth year from the allotment date. The bond issue will be allotted on Aug. 29, according to the merchant bankers.
This first tier-I bond issuance of the fiscal came after the Securities Exchange Board of India said earlier this month that the valuation of tier-I bonds by mutual funds would be on a yield-to-call basis. This is a departure from the norms that it had introduced in March 2021, where it directed mutual funds to value these bonds as 100-year instruments.
The norms introduced in 2021 had nearly killed the tier-I bond market as mutual funds — the largest investors of these papers — lost appetite after SEBI tightened valuation rules. While the SEBI has now partially provided relief to investors, pricing of Canara Bank's tier-I bond issue and whether mutual funds will show interest towards this instrument will be keenly watched.
Market participants expect Canara Bank to issue its tier-I debt at a coupon of 8.30-8.35%. The last time Canara Bank tapped the bond market with a tier-I bond issue was in February, when it raised Rs 2,000 crore at a coupon of 8.40%. It was fully subscribed.
In July, Canara Bank raised Rs 10,000 crore through the issuance of 10-year infrastructure bonds at a coupon of 7.40%, which was fully subscribed.
In May, the board of Canara Bank had approved raising up to Rs 8,500 crore through tier-I and tier-II bond issuances. Of this, the bank has allocated Rs 4,000 crore for tier-I bonds and the rest for tier-II papers.
According to merchant bankers, State Bank of India is also likely to hit the corporate bond market with a tier-I bond issue in September.
