Private sector lender IDBI Bank has raised capital worth Rs 745 crore through tier II bonds to enhance capital adequacy and support business growth. It raised debt capital from market after gap of two years.
Bank officials said the money raised through tier II bond offering is expected to increase Capital Adequacy Ratio (CAR) by about 50 basis points. The CAR stood at 11.98 per cent at end of September 2019.
The issue was competitively priced at a coupon of 9.50 per cent p.a. payable annually. The issue opened for bidding in electronic bidding platform of BSE on January 31, 2020 and allotment to successful bidders closed on February 3, 2020, IDBI Bank said in a statement.
These are Basel III compliant bonds. The size of bond offering was Rs 1,500 crore, with a base size of Rs 500 crore and a greenshoe option to retain over-subscription up to Rs 1,000 crore. Though, the response was more than issue size, bank decided to raise less than Rs 1,000 crore of greenshoe portion keeping in mind interest costs. The bank has adequate capital base, bank executives said.
The issued bonds have maturity of 10 years with call option after the instrument has run for five years and every year thereafter.
Meanwhile IDBI stock closed 5.76 per cent lower at Rs 35.15 per share on BSE. The Government of India, which held 47.11 per cent stake in bank as promoter in December 2019, has decided to divest its holding to private, retail and institutional investors through the stock exchange.