IDFC First Bank raises ₹1,500 crore via tier-2 bonds in domestic market

• The unsecured, tier-2 bonds were raised for a tenor of 10 years with a call option at the end of five years and carry a coupon of 8.4%.
  
• Including this capital raise, the bank’s capital adequacy, as computed on March 31, 2023 financials, would be 17.68%.
  
• The capital raising via the bond issuance will provide with greater headroom for growth, the bank said.
  
• Tier-2 bonds are debt instruments issued to raise capital and are considered to be a cost-effective source for banks.
  

IDFC First Bank on Monday said it has raised ₹1,500 crore through tier-2 bonds in the Indian bond market.

The unsecured, tier-2 bonds were raised for a tenor of 10 years with a call option at the end of five years and carry a coupon of 8.4%.

Tier-2 bonds are debt instruments that banks issue to raise capital. They offer greater flexibility to banks as they can be issued and redeemed as required. They are also considered a cost-effective source of capital for a bank.

“These privately-placed bonds are issued as unsecured, subordinated, rated, listed, nonconvertible, fully paid-up, taxable, redeemable Basel III-compliant tier-2 Bonds (in nature of debentures) at a face value of ₹1 crore each and were raised through private placement on the NSE E-bidding platform,” IDFC First Bank said in a press release.

The bank said that the participation for the issuance came from domestic qualified institutional investors. “The bidding witnessed healthy interest from corporates, public pension funds, provident funds and insurance companies, and the overall issue was oversubscribed,” the bank said.

Including this capital raise, the bank’s capital adequacy, as computed on March 31, 2023 financials, would be 17.68%, and will provide greater headroom for growth, IDFC First Bank said.

The bonds carry a rating of CRISIL AA+/ Stable from CRISIL Ratings Limited and IND AA+/Stable by India Ratings & Research Private Limited. IDFC First Bank tier-2 bond ratings were recently upgraded – in June 2023 – to CRISIL AA+/Stable from CRISIL AA/Positive by CRISIL.

The bank’s shares rose by 0.5% on Tuesday to close at ₹78.17 on the Bombay Stock Exchange.