PNB Raises Rs 974 Crore Via AT-1 Bonds at 8.75% Coupon

PNB's AT1 offering started today with a base size of Rs 500 crore.

On Friday, state-owned lender Punjab National Bank raised Rs 974 crore via additional tier-1 bonds at a coupon rate of 8.75%, 35 basis points (bps) higher than the bond it issued in December, according to people familiar with the matter.

It is the first major AT-1 bond sale by a major Indian bank after the Credit Suisse crisis raised concerns about the risks associated with such an instrument.

“We received bids for the whole book, more than Rs 2,000 crore, but some investors bid more, so we only accepted Rs 974 crore at 8.75%,” an official told the media.

The bank plans to raise up to Rs 2,000 crore through the AT-1 bond auction, with a base size of the issue of Rs 500 crore and a greenshoe option of Rs 1,500 crore.

The bonds are rated “AA+” by India Ratings and “AA” by CARE Ratings. AT-1 bonds are perpetual with a call option after five years.

Since these bonds have a maturity of 100 years, they are called perpetual bonds in nature.

“Despite the poor global market sentiment, the PNB offering has been oversubscribed by 21 institutional investors, and the issuer has raised Rs 974 crore at an interest rate of 8.75%.

Including PNB’s latest fundraising, Indian banks have raised Rs 34,394 crore through AT-1 bonds as of FY23.

Earlier this month, UCO Bank raised Rs 500 crore at a coupon rate of 9.5%, while State Bank of India (SBI) raised Rs 3,717 crore at a coupon rate of 8.25% earlier this month, according to Bloomberg data.

In February, data showed that SBI raised Rs 4,544 crore at a coupon of 8.2%. In FY22, Indian banks raised a record Rs 41,569 crore through AT-1 bonds, well above the Rs 18,723 crore raised in the previous financial year.

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