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Informist, Monday, Dec. 2, 2024

--Sources: Punjab & Sind Bk likely to raise up to INR 30 bln via infra bonds 

--Sources: Punjab & Sind Bk may tap mkt with 10-yr infra bonds post MPC meet 

By Sachi Pandey and Ashna Mariam George

MUMBAI – Punjab & Sind Bank is set to raise INR 30 billion through infrastructure bonds later this month, after the Monetary Policy Committee's upcoming meeting where the odds of a rate cut have gone up after a shockingly weak GDP print, according to multiple sources.

The proposed bond issue is likely to have a base size of INR 5 billion and a greenshoe option of INR 25 billion, sources said. The infrastructure bonds are likely to mature in 10 years. 

"They are in the middle of discussions and approvals. Most likely post policy they will announce full details on EBP (electronic bidding platform)," one of the persons said on condition of anonymity. The bidding may take place on the National Stock exchange's electronic bidding platform, sources said.

The last time Punjab & Sind Bank raised funds through corporate bonds was in November 2019, when it raised INR 5 billion through tier-II bonds maturing in December 2029 at a coupon of 8.67%.

Market participants expect the coupon for the upcoming infrastructure bonds to range between 7.55% and 7.60%. "Considering it's a AA-rated paper, and they are not a very frequent issuer, the coupon will be higher," another source told Informist. India Ratings and Research on Oct. 23 assigned 'AA' rating to Punjab & Sind Bank's proposed INR 30 billion infrastructure bonds with a stable outlook.

However, borrowing costs may come down if the Reserve Bank of India cuts interest rates this week, as expected by a section of the market  after the weaker-than-expected GDP print for Jul-Sept, dealers said. 

Even though the merchant bankers for the issuance is yet to be decided, sources indicate that multiple arrangers are expected to participate in the issuance. 

The issuance is part of a broader trend among banks to raise funds through infrastructure bonds. Banks have cumulatively raised over INR 750 billion through infrastructure bonds so far in 2024-25. Of this, the country’s largest lender, State Bank of India, alone raised INR 300 billion in three tranches through 15-year infra bonds in June, July, and November. Another INR 100 billion was raised by Canara Bank through 10-year infrastructure bonds at 7.40%.

Infrastructure bonds are particularly appealing for banks as they are exempt from regulatory reserve requirements such as the statutory liquidity ratio and cash reserve ratio. They are also exempt from priority sector lending requirements.

On Monday, shares of the bank ended 0.2% lower at INR 49.92 on the National Stock Exchange. End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Saji George Titus

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