Bank of India raises ₹2,500 crore in tier II bonds at 7.28% cut-off

Bank of India raised Rs 2,500 crore via 10-year tier II bonds at a 7.28 per cent cut-off with a call option after five years; HUDCO raised Rs 1,905 crore via seven-year bonds at 6.98 per cent

State-owned Bank of India (BoI) on Wednesday raised ₹2,500 crore through Tier-II bonds maturing in 10 years at a tight cutoff of 7.28 per cent. The bonds carry a call option at the end of the fifth year and every year thereafter. The bank had planned to raise ₹2,500 crore, including a ₹1,500 crore greenshoe option. 

Additionally, state-owned Housing and Urban Development Corporation (Hudco) raised ₹1,905 crore through bonds maturing in seven years at 6.98 per cent. Hudco was in the market to raise ₹2,500 crore. 

Market participants said both issuances were tightly priced and also benefited from PFC and Sidbi scrapping their planned ₹11,500-crore bond offerings on Tuesday. As a result, investors absorbed the bonds.  

“Both BoI and Hudco benefited from the withdrawal of the issuances yesterday (Tuesday),” said a dealer at a state-owned bank. “Pension funds were the major bidders who deployed their funds in today’s (Wednesday) issuances because yesterday’s (Tuesday) issuances were withdrawn,” he added. 

Lately, several banks have tapped the domestic debt capital market to raise funds through Tier-II bonds. Banks were largely absent from the debt capital market for the first half of the financial year. 

In October, the State Bank of India tapped the market to raise ₹7,500 crore via Tier-II bonds at record levels of 6.93 per cent.

Following this, in November, ICICI Bank raised ₹3,945 crore via 15-year Tier-II bonds at a coupon rate of 7.40 per cent. 

 

The bank had previously tested the market in June by raising Rs 1,000 crore through tier II bonds maturing in 15 years at 7.45 per cent.

 

What other bank bond issuances were seen in November?

 

Meanwhile, Canara Bank, in November, raised Rs 3,500 crore through additional tier I (AT I) bonds at 7.55 per cent — marking the first AT I bond issuance by a bank in almost a year.

 

Axis Bank, on the other hand, raised Rs 5,000 crore through a 10-year infrastructure bond at 7.27 per cent.