“The bank had planned to raise `5,000 crore as an initial issue and another `5,000 crore as an on-demand green boot. The bank received bids totaling `16,000 crore for the seven-year issue to allow it to meet its `10,000 crore target.” A BoB spokesperson did not respond to an email seeking comment.
This is the first domestic green bond issuance of its kind by any public or private sector bank in India. Bond proceeds will be used to finance renewable energy projects including wind, solar, hydro and bioenergy. It will also be used to finance energy efficient infrastructure projects.
Bank of Baroda has successfully raised ₹ 10,000 crore through its inaugural 7-year green infra bond, priced at 7.10%. The issuance, which aims to finance renewable energy and energy efficiency projects, is seeing strong demand from domestic institutional investors. This marks a significant step for the public sector lender in terms of sustainable financing.
“The bank has already identified the projects that the money will be invested in. This is the first time the bank has raised money from an infra bond and investors have already lined up and the bank is going ahead with the issue despite market volatility,” the person said. The issue was attended by long-term investors such as life insurance companies, pension and provident funds. ET could not ascertain the names of the investors. Rating agencies CARE and ICRA had assigned a AAA rating to the bond due to the government’s majority ownership in the bank, comfortable capital book, diversified development book and improved profitability. This is the first infra bond issuance by BoB this year. The state-owned bank had raised Rs 5,000 crore through ten-year infrastructure bonds at a coupon rate of 7.23% in January last year.
SIDBI withdraws the issue
Even as BoB completed its fund raising, another state-owned issuer SIDBI canceled its proposed bond issue to raise a total of 8,000 houses due to a gap between issuer expectations and investor demand at the short end of the bond market.
SIDBI planned to raise Rs 2,000 crore with a Green Show option of Rs 6,000 crore through NCDs with a maturity of around 3 years 4 months. A bid document seen by ET showed that investors were expecting a yield of 7.27% for at least Rs 2,000 crore SIDBI, which was higher than the 7.10% three-year bond issued by its peer NABARD on February 27.
“These withdrawals are minimal, as SIDBI generally continues to export its bonds. This event indicates that investor appetite for short-term AAA instruments is weak, when issuers expect better prices. In contrast, long-term high-quality bonds continue to attract strong demand from large institutional investors such as long-term funds of insurance companies that meet regulatory investment requirements,” said Venkatakrishnan Srinivasan, of Rockfort. Fincap LLP Managing Partner.
