Canara Bank Successfully Raises Rs 5,000 Crore Through Tier II Bonds
State-run lender Canara Bank raised Rs 5,000 crore on Thursday through a successful bond sale. The bank accepted bids at a coupon rate of 7.24%, reaching its maximum fundraising target.
Details of the Bond Issue
The bonds are Basel III compliant Tier II instruments with a 10 year maturity period. While the base size of the issue was set at Rs 2,000 crore, Canara Bank exercised the “greenshoe option” to retain an additional Rs 3,000 crore due to strong interest.
High Investor Interest and Bidding Trends
Market participants noted strong demand during the bidding process. The bank received various offers at different interest rates:
- Rs 1,970 crore in bids at 7.20%
- Multiple bids ranging from 7.21% to 7.23% for cumulative amounts up to Rs 4,430 crore
- Rs 5,350 crore in total bids at the 7.24% rate
Ultimately, the bank decided to accept bids at the 7.24% coupon rate, allowing it to hit its full Rs 5,000 crore limit.
Ratings and Call Options
These bonds come with a “call option,” which allows the bank to buy back the bonds at the end of the fifth year or any year after that.
The issue has been well-received by credit agencies. Both ICRA and India Ratings have assigned the bonds a ‘AAA’ rating with a ‘Stable’ outlook, indicating a high level of safety and financial stability.
Market Performance
Following the announcement, Canara Bank’s stock performed well on the BSE. The shares closed 0.06% higher at Rs 158.75 each. This positive movement came even as the broader market benchmark saw a slight correction of 0.03%.
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