Canara Bank is looking to raise Rs 3,500 crore via the issue of additional Tier-I bonds, according to a person with knowledge of the matter.
For the issue, the AT-1 bonds have a face value of Rs 1 crore each. The issue size is Rs 1,000 crore, with a greenshoe option of Rs 2,500 crore. The bidding will open on Thursday, as the person quoted above said on the condition of anonymity.
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In June, the bank's board of directors approved a Rs 7,500-crore fundraising plan for the financial year, out of which Rs 3,500 crore were to be raised through AT-1 bonds and the remaining Rs 4,000 crore through Tier-II bonds.
The AT-1 bonds form a capital buffer for the bank and contribute to its capital strength. While bonds are perpetual in nature and have no maturity date, they typically have a call option at the end of 10 years.
The sentiment around these equity-like instruments had taken a hit globally when Credit Suisse wrote down its AT-1 bonds worth $17 billion earlier this year. In India, Yes Bank Ltd.'s AT-1 bonds worth Rs 8,000 crore were written off as part of its restructuring scheme following the RBI-mediated resolution in 2020.
In September, Canara Bank raised Rs 5,000 crore through the maiden issuance of long-term infrastructure bonds at a coupon rate of 7.54% per annum. However, funds raised through infrastructure bonds are not included in the calculation of the capital adequacy ratio.
In the September quarter, the public sector bank reported a 43% year-on-year rise in its net profit to Rs 3,606.1 crore. The bank's capital adequacy ratio stood at 16.20% as of Sept. 30, with CET-I at 11.58%. The net interest margin during the quarter fell 5 basis points to 3% on a sequential basis.
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