Union Bank of India plans to raise Rs 1,500 crore through AT1 bond

Union Bank of India is looking to raise up to Rs 1,500 crore in capital through tier-I bonds and another Rs 1,100 crore via Indian Renewable Energy Development Agency (IREDA) via medium-term bonds in the coming week.

Debt market sources said Union Bank has indicated that its offering for AT bonds will have an issue size of Rs 500 crore with green shoe option of Rs 1,000 crore.

CRISIL Ratings has assigned “AA/stable” to tier-I bonds of Union Bank. The overall ratings continue to reflect the expectation of strong support from the majority stakeholder, Government of India (GoI) and the bank’s sizable scale of operations. These strengths are partially offset by modest asset quality and modest, albeit improving, earnings profile.

The bank had capital adequacy ratio of 13.92 per cent with tier I of 11.75 per cent at end of December 2021.

As for IREDA, India Ratings has assigned “AA+” rating for its borrowing programme for the current financial year.

The ratings continue to factor in IREDA’s systemic importance to the GoI in view of the need to address issues related to the financing of renewable energy (RE) projects.

IREDA’s capital adequacy ratio continued to be higher than the regulatory benchmark (of 13 per cent) at 17.12 per cent in FY21. IREDA needs increased equity infusions to improve its capital buffer required for growth and better provisioning.

IREDA’s leverage (debt/equity) declined 8.01x in FYE21 from 8.67x in FYE20 on an increase in equity after it registered healthy profits.