Canara Bank raises Rs 3,000 cr via AT1 bonds

The issue had a base size of Rs 1,000 crore and a greenshoe option of Rs 2,000 crore.

AT1 bonds are perpetual, meaning they have no maturity date, though banks can choose to call and redeem them every five or ten years.

Canara Bank has reserved the right to exercise the call option in the bond's fifth year.

The bank attracted interest from typical tier-I bond investors, including insurance companies, pension funds, wealth management firms, and brokerages, reported to NDTV Profit.

Although mutual funds did participate in this bond issue, their contribution was a relatively small portion of the overall demand, according to sources who spoke on the condition of anonymity.

This is the first tier-I bond issue of the current fiscal year, following the Securities and Exchange Board of India's (SEBI) recent announcement that tier-I bonds would now be valued by mutual funds based on a yield-to-call basis.

This change deviates from the previous norm introduced in March 2021, which required mutual funds to value these bonds as if they were 100-year instruments.

The 2021 regulations had significantly dampened the tier-I bond market, as mutual funds—historically the largest investors in these bonds—reduced their investment due to the stricter valuation rules imposed by SEBI.

Canara Bank's tier-I bond issue came amid a lack of tier-I bond supply in the market, said the report.

Canara Bank's tier-I bond issuance is rated AA+ by ICRA.

The bond issue will be allotted on Aug. 29, the report stated citing the merchant bankers.

The last time Canara Bank issued a tier-I bond was in February when it raised Rs 2,000 crore at a coupon rate of 8.40%. That issue was fully subscribed.