Synopsis: Bank of Baroda successfully raised ₹5,000 crore through a 10-year infrastructure bond issuance, securing the tightest pricing of recent times at 7.26%. This marks the bank's second bond issuance within a fortnight, following the ₹5,000 crore sale in August. Both issuances were oversubscribed nearly three times, demonstrating strong investor demand.
State-owned Bank of Baroda has successfully raised Rs. 5,000 crore through its latest 10-year infrastructure bond issuance.
This marks the second such issuance by the bank in just two weeks, following a previous sale of Rs. 5,000 crore on August 26, which comes amidst a wave of bond issuances by banks looking to tap the market amid slowing deposit growth.
According to officials, the pricing for the newest offering was squeezed to 7.26%, 0.04% lower than the previous issue.
This tighter pricing is noteworthy as it represents one of the most competitive rates achieved in recent times, further indicating strong investor confidence.
Both bond issuances by the bank were oversubscribed nearly three times, highlighting the strong demand from domestic investors.
In fact, feedback from investors who missed out on the previous issuance prompted the bank to return to the market with this subsequent offering sooner than planned.
The latest issuance attracted 105 bids totalling Rs. 14,215 crore, from which Rs. 5,000 crore were accepted.
Domestic investors, including mutual funds, insurance companies, and pension funds, played a significant role in subscribing to the bonds.
With this latest issuance, the bank has now exhausted its board-approved limit of Rs. 10,000 crore for raising funds via infrastructure bonds.
At present, there are no immediate plans for further bond issuances of this kind.
However, Bank of Baroda retains the capacity to raise an additional Rs. 7,500 crore through tier-I or tier-II bonds and may explore these options in the future.
In response to queries about the attractive pricing of the bond issuance, officials explained that funds mobilized through bonds, unlike deposits, are not subject to mandatory statutory liquidity ratio (SLR) or cash reserve ratio (CRR) requirements.
This exemption effectively makes the cost of raising funds via bonds approximately 0.65% cheaper than through traditional deposits.
In conclusion, Bank of Baroda’s latest bond issuance reflects its strategic approach to secure funds in a cost-efficient manner, with strong demand from domestic investors.
While the bank has reached its cap for infrastructure bond issuances, its readiness to tap into additional tier-I or tier-II bonds indicates its forward-looking strategy in maintaining adequate capital levels for future growth.
Disclaimer: The information provided in this article is based on recent reports and statements from Bank of Baroda officials. Investment decisions should be made based on a thorough evaluation of market conditions and personal financial circumstances. This article does not constitute financial or investment advice.
