ICICI likely to place infra bonds up to Rs 3,000 cr with LIC

ICICI Bank is likely to do a private placement of an infrastructure bond issue solely with Life Insurance Corporation (LIC) of India. According to sources, the amount is about Rs 3,000 crore.

The bank also plans to place infra bonds up to Rs 1,000 crore with other insurance companies.

“They are eying LIC because they have not bought a large quantum of bonds in a while and considering ICICI Bank is a large bank with good credit ratings, LIC might buy a large quantum of these,” said an issue arranger not involved in the issue.

ICICI Bank is the sole arranger of the issue. The bank declined to comment on the matter. LIC officials were not reachable.

Following the Reserve Bank of India (RBI)’s move to exempt the cash reserve ratio and statutory liquidity ratio rules on funds raised via long-term infra bonds, ICICI Bank will be the first lender to issue these.

The coupon rate of these semi-annual, 10-year bonds is likely to be 9.15 per cent. “A return of 9.15 per cent is very attractive. The bonds will get subscribed,” said a trader.

Other private sector lenders such as Axis Bank and YES Bank have also announced that they will be raising money via long-term bonds in the coming months. YES Bank plans to raise Rs 3,000 crore in the next 12 months. The Axis Bank management said they were yet to finalise details.

RBI had said funds raised via 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. Besides, loans funded through this process will be exempt from the computation of adjusted net bank credit for the purpose of calculating priority sector lending requirements.

Experts believe the money raised by the bank will be used to further grow its housing loan portfolio. The lender has been aggressively building its home loan book and has expanded it by 22.5 per cent by the end of March, from a year earlier.

At the end of March, the home loan book stood at Rs 709, half the total retail advances. The total retail finance portfolio at the end of 2013-14 was Rs 14,118 crore.