Axis Bank's Rs 6,000 cr infra bond issue likely to be placed next week

Sources say the tenure of the Axis Bank bonds will be 10 years and the likely coupon rate would be 8.85 per cent

Axis Bank, India’s third largest private sector lender, is planning to raise Rs 6,000 crore by way of infrastructure bonds and the issue is likely to be placed next week. According to sources, the tenure of the bonds will be 10 years and the likely coupon rate is 8.85 per cent. The bank has also contacted prospective investors who happen to be primarily insurers.

“The issue might happen next week. They want to raise the money before the Reserve Bank of India (RBI) monetary policy to be held on December 2,” said a senior official of an insurance company who was contacted by the bank. The official also added they were waiting for the final pricing, based on which insurance companies will take a decision.

The rush to raise money via these long-term bonds had picked up after RBI, earlier this year, had announced that long-term bonds (tenor of more than seven years) will be exempt from cash and statutory reserve requirements, if the proceeds were used to fund new long-term infrastructure projects and affordable housing. Also, the loans funded via this process will be exempt from the computation of adjusted net bank credit for the purpose of calculating priority sector lending requirements.

“We have all the approvals in place and are prepared enough to launch the bond issue anytime soon,” said an Axis Bank person familiar with the development.

Earlier this week, IFC, part of the World Bank Group, had a bond issueand is planning to invest proceeds of rupee-denominated bonds into Axis Bank’s proposed infrastructure bonds.

ICICI Bank was the first to issue these bonds earlier this year. Interest rates have softened since then and the expectation is in the months to come more banks might come up with such bonds.