Indian banks eye record infra bond issue for second straight fiscal year

Bank Of India

12/07/2024 08:33

By Dharamraj Dhutia and Bhakti Tambe
       MUMBAI, July 12 (Reuters) - Indian banks are set to
raise around 400 billion rupees ($4.79 billion) through
infrastructure bonds in July and August, potentially setting a
record for the second consecutive year, according to five
merchant bankers on Friday.
    If successful, funds raised via these bonds in the first
five months of the current fiscal year started in April will
surpass the 544 billion rupees raised in fiscal year 2023/24.
    Infrastructure bond issues had picked up last year, and the
trend will continue as the gap between credit demand and deposit
growth continues, said Shameek Ray, head of debt capital markets
at ICICI Securities Primary Dealership.
    Government spending on infrastructure and a pick-up in
investment in sectors like steel, roads and renewable energy is
generating demand for funds, said Arnab Choudhury, head of debt
capital markets at SBI Capital Markets.
    Infrastructure bonds are issued to finance long-term
development projects.
    Canara Bank  CNBK.NS  and Bank of Baroda  BOB.NS  are likely
to raise 100 billion rupees each, while Bank of India  BOI.NS 
is expected to raise 50 billion rupees, three of the bankers
said.
    HDFC Bank  HDBK.NS , India's biggest private bank, is also
in early talks to raise around 100-150 billion rupees, they
added.
    None of the banks responded to Reuters' request for
confirmation.
    So far this fiscal year, State Bank of India  SBI.NS  has
raised 200 billion rupees, and ICICI Bank  ICBK.NS  has raised
30 billion rupees through these bonds.
    
 Bank             Tenor      Issue period       Amount (in
                                                billion rupees)
 SBI              15 years                June              100
 ICICI Bank       10 years                June               30
 SBI              15 years                July              100
 Bank of Baroda   10 years   In advanced stage              100
 Canara Bank      10 years   In advanced stage              100
 Bank of India    10 years   In planning stage               50
                                                
 HDFC Bank        10 years   In planning stage          100-150
 
    Investor appetite for long-duration infrastructure bonds
could spur more issuances in the coming months, Choudhury said.
    According to the interim budget announced in February, the
federal government plans to spend over 11 trillion rupees this
fiscal year on long-term infrastructure projects to stimulate
growth and create jobs.
    "These bonds are seeing strong demand from insurance
companies and provident funds, as it allows them diversification
and meets their need for increasing portfolio duration," Ray
said.
    The strong demand has also helped reduce the spread sought
by investors over government securities, he added.
 
 ($1 = 83.5250 Indian rupees)

 (Reporting by Dharamraj Dhutia and Bhakti Tambe; Editing by
Varun H K)
 ((Dharamraj.Dhutia@thomsonreuters.com;))