Financial firms to raise funds via bonds

The bond market has significantly witnessed a strong fundraising activity with Bank of Baroda, NABARD, and the IREDA raising approximately Rs13,500 crore through bond issuances.

Financial firms to raise funds via bonds

The IREDA's bond issue had a base size of Rs500 crore and Rs1,500 crore in greenshoe option. A greenshoe is the over-allotment option which allows the companies to issue more bonds to raise more funds than the base issue size. It is touted to be a substitutive path for financial stock growth as there are stringent norms introduced by RBI, the central bank, the entities are looking forward towards alternative avenues to stimulate their fund growth.

NABARD raised 10,000 crores via 10-year bonds, at a coupon rate of 7.65 percent while Bank of Baroda raised 2500 crore through tier-2 bonds at a coupon rate of 7.75 percent. Similarly succeeding on the same pattern, National Bank for Financing Infrastructure and Development [NABFID] will raise 10,000 crore through 15-year infrastructure bonds and PNB is also planning to raise 3000 crore at the end of the month.

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The issuance of bonds is one way for companies to raise capital funds which acts as a loan between an investor and a corporation. Bond issuances enable corporations to attract a large number of lenders efficiently and effectively. For any given bond, they all have the same interest rate and maturity date. The respective companies also benefit from the flexibility of the significant variety of bonds they can offer. 

HIGHLIGHTS ON BANK's BOND ISSUE:

Small Industries Development Bank of India[SIDBI] is also planning to raise almost 5,000 crore, while Kerala Infrastructure Investment Fund Board [KIIFB] will raise 1,499.96 crore. 

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On the other hand, HDFC Bank had also raised 7,425 crore via non-convertible bonds for funding infrastructure and affordable housing projects. The bank had issued and allotted a private placement basis of 7.71 percent with unsecured, redeemable, long-term, fully paid up, non-convertible bonds in the nature of debentures. Meanwhile, small cap firm Shriram Finance sold two bonds amounting to 2,000 crore and Tata Projects issued two bonds with the total amount of  1,150 crore.

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