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Kotak Mahindra Bank secures Rs 18.95 billion via infrastructure bonds

2023-06-27

Kotak Mahindra Bank, a private-sector lender, announced that it had successfully raised Rs 18.95 billion by issuing seven-year infrastructure bonds. The purpose of these bonds was to provide funding for various sectors such as power, roads, and housing. The interest rate, or coupon, for the bonds was fixed at 7.55 percent. The bond issuance consisted of two parts: a base size of Rs 12.50 billion and a greenshoe option to retain an additional Rs 12.50 billion. The bank received bids totaling Rs 36.05 billion, but it accepted Rs 18.95 billion at the specified interest rate. This information was conveyed in a statement released by the bank. It is important to note that these bonds were given a rating of "AAA/Stable" by CRISIL, indicating their high quality and stability.

The bank's board of directors approved a plan to raise funds through bonds, with an upper limit of Rs 70 billion. These infrastructure bonds are considered long-term instruments and must have a minimum maturity period of seven years. Bond market dealers pointed out that the bank obtained a favourable price for its bonds due to a 7-8 basis points increase in the yield of government bonds over the past week. The majority of investors in the bonds were insurance companies and other institutions. Data from JM Financial Services revealed that the total funds raised by banks through infrastructure bonds decreased from around Rs 272 billion in FY22 to Rs 199 billion in FY23. State Bank of India (SBI) raised Rs 100 billion through infrastructure bonds, while ICICI Bank raised Rs 71 billion.

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