Bank of Baroda plans to raise up to Rs 1,000 cr via AT-1 bonds

“Bank may increase the amount of issuance as it is still under process,” an arranger said.

The coupon on the AT-1 bonds is set during the auctions held on the electronic bidding platform.
The coupon on the AT-1 bonds is set during the auctions held on the electronic bidding platform.

Bank of Baroda, the country’s second-largest state-owned lender, plans to raise up to Rs 1,000 crore through the issuance of Basel-III compliant Additional Tier-I (AT-1) bonds next week. The offer comprises base issue of Rs 250 crore with a green shoe option to retain oversubscription up to Rs 750 crore. “Bank may increase the amount of issuance as it is still under process,” an arranger said.

The auction for the AT-1 bonds is likely to be held on January 27 on the National Stock Exchange’s bidding platform, and may set better coupon than their previous bond issue considering the demand for state-owned banks bonds. AT-1 bonds are types of perpetual debt instruments that banks use to augment their core equity base and, thus, comply with Basel-III norms. The coupon on the AT-1 bonds is set during the auctions held on the electronic bidding platform.

In November, the bank had raised Rs 1,997 crore by issuing Basel-III compliant AT-1 bonds at a 7.95% coupon. The issue had received a heavy demand from investors, which led banks to set a lower coupon. The bank has received total bids worth Rs 5,308 crore, of which the issuance was finalised for Rs 1,997 crore.

Since the start of last year, all issuances of AT-1 bonds were done based on amended regulations by Sebi. The amendments said the residual maturity of AT-1 bonds is 10-year till March 31, 2022, and will be increased subsequently in the coming years.

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