Canara Bank tapped the bond market and raised Rs 3,000 crore at a coupon of 8.27% on Tuesday in what can be called the first tier-I bond issue of the current financial year, according to three persons aware of the matter.
The rate is tighter than market participants' expectations of 8.30–8.35%, they told NDTV Profit on the condition of anonymity. The issue, which had a base size of Rs 1,000 crore and a greenshoe option of Rs 2,000 crore, was fully subscribed.
The tier-I bond issuance, which is rated AA+ by ICRA, carries a call option on the fifth year from the allotment date. The bond issue will be allotted on Aug. 29, according to the merchant bankers.
This first tier-I bond of the current fiscal has come as the Securities Exchange Board of India said earlier this month that the valuation of tier-I bonds by mutual funds would be on a yield-to-call basis. This was a departure from the norms that it had introduced in March 2021, where it directed mutual funds to value these bonds as 100-year instruments.
The norms, introduced in 2021, had nearly killed the tier-I bond market as mutual funds—the largest investors of these papers—lost appetite after SEBI tightened valuation rules.
The last time Canara Bank tapped the bond market with a tier-I bond issue was in February, when it raised Rs 2,000 crore at a coupon of 8.40%. It was fully subscribed.
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