Nabard raises Rs 4,864 crore at 7.40%; IRFC raises Rs 2,345 cr at 7.09%

PNB looking to raise Rs 3,000 cr through tier-II bonds

The National Bank for Agriculture and Rural Development (Nabard) raised Rs 4,864 crore on Thursday through a 5-year and 4.5-month bond offering, with a coupon rate of 7.40 per cent. Meanwhile, state-owned Indian Railway Finance Corporation (IRFC) raised Rs 2,345 crore through 10-year bonds at a coupon rate of 7.09 per cent, according to sources familiar with the development.

 

While Nabard, India’s apex development bank, was in the market to raise Rs 7,000 crore, with a base issue of Rs 3,000 crore and a green shoe option of Rs 4,000 crore, it only accepted bids worth Rs 4,864 crore as the company was looking to raise funds at a super-tight rate but managed to get a pricing of 7.40 per cent, said market participants.

 

Similarly, IRFC, the dedicated financing arm of Indian Railways, aimed to raise Rs 3,000 crore with a base issue of Rs 500 crore and a green shoe option of Rs 2,500 crore, but ultimately retained Rs 2,345 crore after successfully reducing the pricing from its previous issuance, which had a coupon rate of 7.14 per cent, according to market participants.

 

“The robust demand for AAA-rated long-term bonds reflects institutional investors’ appetite to lock in higher yields ahead of an anticipated repo rate cut in February. Additionally, regulatory mandates and year-end investment timelines are driving aggressive bidding in the market,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP.

 

“IRFC and PFC, returning after a gap, benefited from fresh investor limits and strong demand, achieving sub-secondary market pricing. December-January typically sees heightened activity as issuers aim to complete their borrowing programmes and align with provident fund inflows during this period,” he added.

 

Earlier this week, state-owned Power Finance Corporation (PFC) raised Rs 6,252 crore through the issuance of bonds with different maturities. The company raised Rs 3,200 crore via 15-year bonds at a coupon of 7.11 per cent and Rs 3,052 crore via 10-year bonds at a coupon of 7.10 per cent. Additionally, Exim Bank raised Rs 2,500 crore through 5-year bonds at a very tight pricing of 7.14 per cent.

 

Separately, state-owned Punjab National Bank is looking to raise Rs 3,000 crore through Tier-II bonds with a maturity of 15 years and a call option at the end of 10 years, sources said.

 

Earlier, Bank of India, Bank of Baroda, State Bank of India, and a few others have raised funds through their Tier-II bonds in the current financial year (FY25). Public sector banks have proposed to the Finance Ministry their plan to raise Rs 54,800 crore through Additional Tier-1 (AT-1) and Tier-II bonds in FY25, 37 per cent more than the Rs 39,880 crore raised in FY24.

 

Tier-II bonds are a type of debt instrument banks issue to raise capital for their operations. Tier-II bonds form part of the bank’s Tier-II capital and are subordinate to Tier-I capital.