InvestorQ : Can you tell me about the ICICI Bank plans to raise Rs.8,000 crore through the issue of infrastructure bonds?
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Can you tell me about the ICICI Bank plans to raise Rs.8,000 crore through the issue of infrastructure bonds?

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2 months ago
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ICICI Bank, is planning to raise up to Rs.8,000 crore through the issue of infrastructure bonds. It has already got the board approval to raise up to Rs.10,000 crore, either in one go or in tranches. Essentially, ICICI Bank will use these funds raised to fund projects in transport, power and affordable housing. Already, CRISIL has assigned “AAA/Stable” rating for these bonds, which hint at highest safety in interest and principal payment.

The basic bond issue will be worth Rs.500 crore but this will include a Greenshoe option to retain oversubscription to the tune of Rs.7,500 crore. The base issue and the green shoe option combined will be worth Rs.8,000 crore for ICICI Bank. These bonds will have a term to maturity of 10 years and since these are eligible infrastructure bonds, persons investing in these bonds will get exemption under Section 80CCF of the Income Tax Act.

Regarding the coupon rate on the bonds, it is yet to be decided. However, if you look at peer group coupons for similar 10-year bonds, the coupon could be in the range of 7.25% to 7.30%. This would is an attractive rate for ICICI Bank because it is just above the YTM at which benchmark 10 year government bonds trade. However, bond analysts are of the view that this could change depending on how hawkish the RBI gets in the coming MPC meets.

Currently, ICICI Bank has a fairly large infrastructure exposure spread across road, ports, telecom and urban development adding up to Rs.48,981 crore as of FY21. Since these funds are being raised via infrastructure bonds, it is exempt from liquidity requirement norms pertaining to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). This exemption has been specifically given to encourage lending to the infrastructure sector.

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