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Informist, Thursday, Dec. 12, 2024

--Sources: PNB likely to raise up to INR 30 bln via 15-year, tier-II bonds

--Sources: PNB may invite bids for tier-II bonds by Dec-end 

By Sachi Pandey

MUMBAI – Punjab National Bank is in talks with market participants to raise up to INR 30 billion from the corporate debt market by the end of December, sources aware of the development told Informist. The bank plans to tap the market with Basel-III compliant tier-II bonds maturing in 15 years, the sources said.

According to merchant bankers, the public sector bank is also considering a call option on the bonds, exercisable after 10 years from the date of allotment.

"They are getting feedback from the market on what levels they can get. They are mostly targeting before December ends, likely the third week of December before Christmas," one of the sources closely involved in the transaction told Informist on the condition of anonymity.

Earlier this week, rating agencies such as CARE Ratings, ICRA Ratings and CRISIL Ratings reaffirmed their 'AAA' rating on Punjab National Bank's Basel III-compliant tier-II bonds with a stable outlook. 

The base size and greenshoe option for the proposed bond issue, however, haven't been finalised yet, the source said. 

Market participants expect the coupon on the bonds to range between 7.25% and 7.30%. The annualised yield on the 15-year benchmark, 7.23%, 2039 bond, is currently at 6.97%. As such, if the coupon is to be between 7.25% and 7.30%, the bond will be only 28-30 basis points over benchmark levels.

Market participants say the current market environment supports a lower spread for these bonds compared to previous issuances. "Rates are lower now, and the 7.25-7.30% level is achievable," said a source at a large private-sector bank. "Plus, this is a liquid paper with a AAA rating. It will go at decent levels."

This would be the first bond issuance by Punjab National Bank in the current financial year. Last year, the bank had raised INR 30.90 billion through 15-year tier-II bonds at a coupon of 7.74%.

So far this financial year, five banks have raised INR 222 billion through tier-II bonds, with coupons ranging between 7.33% and 10.9%.

On Thursday, shares of Punjab National Bank ended 0.8% lower at INR 107.77 on the National Stock Exchange.  End

Edited by Avishek Dutta

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