AU Small Finance Bank Raises Rs 770 Crore Via Tier-II Bonds

AU Small Finance Bank Ltd. raised Rs 770 crore by issuing Tier-II bonds with a 9.2% interest rate on Friday, according to an exchange filing on Friday.

The bank allotted 77,000 unsecured, rated, listed, redeemable, subordinated, non-convertible lower Tier II bonds in the nature of non-convertible debentures with a face value Rs 1 lakh each on a private-placement basis, it said.

AU Small Finance Bank initially launched the bond issue with a base size of Rs 400 crore and a green-shoe option. It received a strong response, with subscriptions nearly double the base amount, the release said.

The bonds have a 10-year maturity, with an option to call back after five years. The issue has been rated ‘AA/Stable' by ICRA and CARE.

AU SFB achieved "one of the largest bond issuances" by any small finance bank amid adverse market conditions, exacerbated by a tight liquidity environment, according to a release.

The recent raise is expected to boost the bank's capital adequacy ratio by around 1%. As of the third quarter of fiscal 2025, including profits for nine months of fiscal 2025, the bank's overall capital adequacy ratio stood at 19.9%, showing strong capitalisation, the release said.

HDFC Bank acted as the lead manager and anchor investor for the deal, alongside Nippon India Mutual Fund. The issuance attracted significant interest from qualified institutional buyers, including mutual funds, insurance companies and pension funds.

"We remain very well-capitalised, and the successful completion of this capital raise is a testament to the strength of our banking franchise and the confidence of our investors," Sanjay Agarwal, chief executive officer of AU Small Finance Bank, said. "The issue proceeds will boost our future growth trajectory and enable us to extend our digitally powered banking products and services across all parts of the country."

Shares of AU Small Finance Bank closed 3.57% lower at Rs 534.60 apiece on the National Stock Exchange, compared to a 0.31% fall in the benchmark Nifty. The stock has fallen 5.38% in the last 12 months but declined 4.38% on a year-to-date basis.

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