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Private sector lender ICICI Bank is planning to raise upto Rs 8,000 crore through infrastructure bonds to finance projects in sectors like transport and power and affordable housing.
Debt market sources said while the private lender is raising upto Rs 8,000 crore in current round, rating agency Crisil has assigned “AAA/Stable” for Rs 10,000 crore of bonds. Lenders have always an option to raise money in tranches.
The issue size is Rs 500 crore with green shoe of Rs 7,500 crore. It will be a 10-year paper. The interest rate rate scenario is unclear due to volatility in markets. The highly rated long term paper (10-year) from corporate would see a coupon of around 7.25-30 per cent, bond dealers said.
ICICI Bank did not respond to email queries on fund raising through infrastructure bonds. Its exposure to Road, ports, telecom, urban development and other infrastructure was Rs 48,981 crore at end of March 2021, according to annual report for FY21.
Funds raised through this route are exempt from liquidity norms Cash Reserve Ratio and Statutory Liquidity Ratio (SLR) requirements and are deployed in long term infra and affordable housing credit.
Crisil in its rating review said the bank actively finances projects for capacity creation in environment-friendly sectors like renewable energy and other sustainable sectors like waste processing and mass rapid transport.
Further, as part of the overall credit appraisal process, the bank analyses the environmental impact of a proposed project and assesses its social risks.
The ratings continue to reflect the bank’s healthy capitalisation, strong market position and comfortable resource profile. These strengths are partially offset by adequate asset quality.
However, a healthy capital position, along with demonstrated ability to raise capital, steady pre-provisioning profits and comfortable provision cover cushion the credit risk profile of the bank against asset quality risks, CRISIL said.
CRISIL in its report on infrastructure said the government’s focus is on building infrastructure and creating jobs. For this, it needs Rs 111 trillion over the next five fiscals as per the National Infrastructure Pipeline (NIP) report. The Government contribution, (both central and state) was expected to be 42 – 46 per cent.
While the current budget provides a fiscal leeway, the private sector needs to step in, and the corporate bond market will have to play a very significant role. The bond market has the potential to contribute much more than the envisaged six-eight per cent of the NIP funding, Crisil said.
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