IDBI Bank raises Rs 2, 500 cr capital via AT-1 bonds

The bank, in a statement, said the size of its Basel-III-compliant AT-I bonds was Rs 1,500 cr, with an option to retain over-subscription up to Rs 1,000 cr

Public sector lender IDBI Bank has raised Rs 2,500 crore through Basel-III-compliant additional Tier-I (AT-I) bonds to enhance its capital adequacy. The coupon (interest rate) for AT-I bonds is 10.75 per cent payable annually.

The Mumbai-based bank is also in the international market to raise up to $500 million through five-year bonds. It will use the money for off-shore lending to customers.

The bank, in a statement, said the size of its Basel-III-compliant AT-I bonds was Rs 1,500 crore, with an option to retain over-subscription up to Rs 1,000 crore.

The issue — which opened on September 29 — received an overwhelming response and has been fully subscribed.

The bonds are rated AA (high safety) by CRISIL.

This was the first AT-I bond issuance by a bank in India, after the Reserve Bank of India modified its Basel-III guidelines on September 1. Basel-III is an international norm on capital preservation that all Indian banks must adhere to fully by March 2019.

M S Raghavan, chairman and managing director, IDBI Bank, said this issuance will pave the way for other banks to issue Tier I bonds in the domestic market.

Axis Bank Ltd, Darashaw & Co. Pvt. Ltd, ICICI Bank Ltd, Trust Investment Advisors Pvt. Ltd and IDBI Capital Market Services Ltd acted as the arrangers to this issue.

Meanwhile, the bank has launched the US dollar-denominated senior unsecured debt offering. The size of issue will depend on the pricing and demand. It could be up to $500 million.

The tenure of the overseas bonds is expected to be around five years. The debt notes will be issued out of the bank’s Dubai branch.

Fitch Ratings has assigned BBB (good credit quality) rating to the proposed bonds by IDBI Bank.