ICICI Bank, the largest private sector bank, earlier in July had raise 7-year infrastructure bonds worth R500 crore with a green shoe option of R500 crore with a coupon rate of 9.75%. Chanda Kochhar, managing director and chief executive officer, had said that infrastructure bonds would play a very important role in the funding structure of the bank as they have been large players in financing infrastructure and housing.
Earlier in July, Andhra Bank's R1,000-crore issue was rated AA+ by ratings agency Crisil, making it the first long-term infrastructure bond to the rated. Kotak Mahindra Bank's R300-crore issue was rated AAA by Crisil earlier in August.
The Reserve Bank of India (RBI) on July 15 issued guidelines for the issuances of long-term bonds (with a minimum maturity of seven years) for financing infrastructure projects and for affordable housing by scheduled commercial banks. These bonds would be exempt from cash, statutory reserve and priority sector lending requirements.
Lakshmi Iyer, chief investment officer for debt at Kotak Mahindra Asset Management, said infrastructure bonds have generally been getting demand from foreign institutional investors (FIIs) and insurance companies. But there isn't too much demand from mututal funds as the maturity periods are too long, she added.
Other private sector lenders such as Axis Bank and Yes Bank had said that they would look at raising infrastructure to augment their funding structure. Though Axis Bank is yet to flesh out the details for its issue, Yes Bank announced that it is looking to raise R3,000 crore through the rest of the year.
Public sector lender Bank of Maharashtra too said that it is looking to raise infrastructure bonds and said that the funds raised would help the bank increase its exposure to the infra sector to about 17% of its loan portfolio by this fiscal end from the current 14%.