IDBI Bank is planning to raise Rs 300 crore by way of a perpetual bond issue this month.“The amount raised will be to meet Tier-I capital requirement of the bank,” said P Sitaram, chief financial officer, IDBI Bank.
A perpetual bond does not carry a maturity date and thereby pays coupons forever. The issuer does not have to redeem them. Therefore, it may be treated as equity and not debt. “Other than equity capital and internal accruals, perpetual bonds are the only source of showing tier-I capital in the balance sheet,” said Anand Dama, banking analyst at Networth Stock Broking.
According to sources, the coupon will be priced in the range of 9.5-9.7%. “The coupon is priced slightly higher. Last month, State Bank of India’s AAA-rated perpetual bond issue was priced at a coupon of 9.05%,” said Ajay Manglunia, senior vice-president, Edelweiss Securities.
n recent times, firms eyeing the debt route are trying to attract investors with higher coupons. “Expectations on coupons have gone up in the current rising interest rates scenario,” said Shailesh Nerurkar, vice-president, Enam Securities.
The cash reserve ratio has already been hiked by 75 basis points at 5.75%. Going forward, the reverse repo rate and repo rate may also be raised. “In the monetary policy to be held in April, the RBI may raise the reverse repo rate and repo rate by 50 basis points each,” said Pradeep Madhav, managing director at STCI Primary Dealership.
According to Reserve Bank of India (RBI) norms, banks are expected to maintain a minimum tier-I capital of 6%. “Over and above the 6%, the finance ministry considers 8% as the optimal level. Many banks are falling short of this optimal level and IDBI Bank is one of them,” Dama said.
Some of the other banks that are falling short of tier-I capital are Bank of Maharashtra, Dena Bank, Central Bank of India, Syndicate Bank and UCO Bank, he said.
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