AU Small Finance Bank raises Rs 770 crore via Tier-II bond issuance

AU Small Finance Bank (AU SFB) on Thursday announced that it has raised Rs 770 crore via issuance of Tier-II bonds at a coupon of 9.20%.

These bonds have a 10-year maturity, with a call option exercisable after 5 years from the date of issuance. This issue is rated ‘AA/Stable’ by ICRA & CARE.

This capital raise is expected to increase the capital adequacy ratio of the Bank by ~1%. Overall, the bank said that it remains well capitalised and had an overall capital adequacy ratio of 19.9% at the end of Q3’FY25, including interim profits for 9M’FY25.

HDFC Bank was the lead manager for the issue and was also the anchor investor for the deal along with Nippon India Mutual Fund. Additionally, the issuance witnessed strong participation from various Qualified Institutional Buyers (QIBs) including mutual funds, insurance companies, and pension funds.

AU SFB had launched the issue at a base size of Rs 400 Cr with a green shoe option. It received an overwhelming response, resulting in subscription of approx. twice the base issue.

"We are delighted with the significant interest in our Tier-II bond issuance. We thank investors for their continuing faith in us amidst a challenging liquidity environment, and specially, to our long-term partner HDFC Bank. They not only lead-managed this issue but also showed support by investing in the capital raise and we thank them for their longstanding partnership. We remain very well capitalized, and the successful completion of this capital raise is a testament to the strength of our banking franchise and the confidence of our investors. The issue proceeds will boost our future growth trajectory and enable us to extend our digitally powered banking products and services across all parts of the country," said Sanjay Agarwal, Founder, MD & CEO, AU Small Finance Bank.

Earlier, the Board of Directors of AU SFB approved the capital raise via issuance of Non-Convertible Debentures categorized as Tier II Capital..

AU SFB continuously evaluates its capital position as per its business growth plans and had last done capital raise in August 2022 for a total capital of Rs 2,500 Crore comprising Tier I capital of Rs 2,000 Crore and Tier II capital of Rs 500 Crore.