ICICI Bank, Axis Bank Likely To Raise Rs 5,000 Cr Each Via Bond Sales

Private sector lender ICICI Bank is likely to raise up to Rs 5,000 crore through the issuance of long-term bonds on Thursday, sources told Business Standard.

The bonds, which are likely to have a maturity of seven years, include a base size of Rs 1,000 crore and a greenshoe option of Rs 5,000 crore, the sources said. The securities are senior unsecured redeemable long-term bonds in the nature of debentures.

“It is likely that ICICI Bank would set a fixed coupon of 7.63 per cent for the bonds,” a source said. On Tuesday, yield on the 10-year benchmark government bond settled at 7.25 per cent while that on the most liquid seven-year government bond closed at 7.22 per cent.

Sources said that another large private lender, Axis Bank, was also looking to raise funds through the issuance of infrastructure bonds worth Rs 5,000 crore.

“Axis bank is also trying for an infra bond issue placement with a large insurance company. They might want the pricing of the bond close to ICICI Bank. It depends on the response from the insurance company on the anchor amount and their views on pricing,” the source said.

Banks have recently embarked on a spree of capital raising through bond issuances. This comes at a time when bank credit off-take continues to sustain at near-historic highs, putting pressure on banks to mobilise funds to finance the loan demand amid slower deposit growth.

Earlier this month, State Bank of India, the country’s largest lender, sold 10-year infrastructure bonds worth a total of Rs 10,000 crore at a coupon of 7.51 per cent.

In October, ICICI bank was said to have sold Rs 4,000 crore worth of seven-year infrastructure bonds at 7.6 per cent, reports said.

“Growth in Bank credit has accelerated during the financial year which is a positive sign of economic activity picking up though banks are challenged by a slower growth in deposits. In this context, it is important to see where credit growth is emanating,” Bank of Baroda’s economists said.