Synopsis: Axis Bank plans to raise 40-50 billion rupees through infrastructure bonds in September to finance long-term development projects, aligning with a growing trend among Indian banks amid a lending-deposit gap.
Axis Bank, one of India’s leading private lenders, plans to raise between 40-50 billion rupees (approximately $480-600 million) through infrastructure bonds in September.
This initiative aligns with a growing trend among Indian banks to finance long-term development projects amid a significant lending-deposit gap.
The bank’s move comes as the Indian government continues to prioritize capital expenditure with a record allocation of 11.11 trillion rupees ($132.40 billion) in its budget, pushing banks to explore alternative fundraising strategies.
Growing Trend in Infrastructure Bonds:
The issuance of infrastructure bonds by Indian banks has seen a notable increase this year, driven by the need to finance large-scale development projects.
As of the first five months of the current financial year, banks have collectively raised 436 billion rupees through infrastructure bonds, and experts anticipate this figure will surpass last year's record issuance of 574 billion rupees.
Axis Bank's decision to enter the market follows similar actions by other major Indian banks, including ICICI Bank, Canara Bank, Bank of Maharashtra, Bank of India, Bank of Baroda, and State Bank of India, which have all issued infrastructure bonds within the past few months.
According to sources, Axis Bank's infrastructure notes are rated AAA by credit rating agencies Crisil and ICRA, reflecting a high level of creditworthiness.
In March, the bank raised 38.51 billion rupees ($459.07 million) through a 10-year infrastructure bond issuance at a coupon rate of 7.64%.
The bank is now preparing to raise additional funds to support new capital expenditure demands, particularly from the private sector.
“This is not for refinancing but fresh loans,” an official stated, highlighting the bank's focus on financing new projects rather than managing existing debt.
Strategic Fundraising Amid Government's Capital Expenditure Push:
The Indian government's emphasis on infrastructure development has created a conducive environment for banks to issue long-term bonds.
By raising funds through these bonds, Axis Bank aims to contribute to the country's development agenda while managing its own financial strategy amid a challenging economic landscape.
The bank is reportedly in discussions to finalize terms with potential large investors before inviting bids for the bond issue.
Axis Bank’s move is part of a broader strategy to bridge the gap between the demand for loans and the availability of deposits, which has been a persistent challenge for many Indian banks.
The growing demand for capital expenditure, particularly from the private sector, underscores the need for such fundraising initiatives.
Axis Bank is expected to officially announce the bond issuance once the discussions with investors are concluded.
While Axis Bank has not commented on its upcoming bond issuance, the market is abuzz with expectations that other major players, such as HDFC Bank and ICICI Bank, may soon follow suit with their own infrastructure bond issues.
In conclusion, Axis Bank’s planned issuance of infrastructure bonds highlights the bank's proactive approach to supporting India’s development goals while managing its financial portfolio effectively.
By leveraging the government’s focus on infrastructure and the favorable credit ratings, Axis Bank is positioning itself to meet the growing demand for long-term project financing.
This strategy not only addresses the immediate funding needs of the bank but also aligns with the broader economic objectives of the country.
As other banks consider similar moves, the infrastructure bond market in India is poised for significant growth in the coming months.
Disclaimer: The information provided in this article is based on current sources and may be subject to change. Please consult Axis Bank's official communications or other authorized sources for the most accurate and up-to-date details.
