Punjab & Sind Bank, a state-owned lender, is planning to raise ₹3,000 crore in December 2024 through the issuance of long-term infrastructure bonds. This marks the bank’s first foray into this type of fundraising. The bonds, which have received an ‘AA’ rating from CRISIL and India Ratings, will have a maturity of 10 years. The funds raised will be used to expand the bank’s loan book and support infrastructure projects. This move comes after the bank reported a 26% rise in net profit for the second quarter of the fiscal year 2024-25, reaching ₹240 crore.
The bank has received board approval to raise a total of ₹5,000 crore through infrastructure bonds in multiple tranches. The initial tranche of ₹3,000 crore will have a base issue size of ₹500 crore with a green-shoe option of ₹2,500 crore. The decision to issue infrastructure bonds comes at a time when banks are increasingly favoring this instrument over Additional Tier 1 (AT-1) and Tier 2 bonds due to their better pricing.
Key Insights:
- Focus: The news highlights Punjab & Sind Bank’s capital-raising initiative through infrastructure bonds.
- Key Event: The bank is issuing ₹3,000 crore worth of 10-year infrastructure bonds, its first such issuance.
- Potential Impact: This move could enhance the bank’s lending capacity, contributing to its growth and profitability. It also reflects the broader trend of banks favoring infrastructure bonds for capital raising.
Investment Implications:
- The issuance of infrastructure bonds could signal confidence in the bank’s future prospects and its commitment to supporting infrastructure development.
- Investors interested in fixed-income securities may find these bonds attractive, given their ‘AA’ rating and the current interest rate environment.
- The bank’s recent financial performance, with a significant rise in net profit, could further boost investor confidence.
- However, investors should carefully evaluate the risks associated with any bond investment, including interest rate risk and credit risk.
Sources:
- Punjab & Sind Bank plans to raise Rs 3000 cr from infra bonds this month
- Punjab & Sind Bank eyeing Rs 3000 crore through infrastructure bonds [invalid URL removed]
- Punjab & Sind Bank plans to raise ₹3,000 cr from maiden infrastructure bonds this month
