After raising Rs 3,000 crore in equity capital last week, the private sector lender, IDFC First Bank, plans to raise a similar amount through debt capital (Tier-II bonds) to support business growth.
In response to a Business Standard query, the bank stated that it had recently obtained an additional rating for Rs 3,000 crore from CRISIL for its Tier-II bonds. This is only an enabling rating to raise Tier-II capital in the future based on growth prospects. There are no immediate plans for the same, as capital adequacy is already high.
The rating agency, CRISIL, has assigned an “AA+/Stable” rating to the proposed Tier-II Basel III compliant bond offering and reaffirmed the same rating for the other debt instruments.
The ratings reflect the bank’s robust capitalisation level. They continue to be driven by a steady scale-up of business, backed by the strengthening of both the retail asset and liability side franchise, improved asset quality, and the expectation of continued improvement in operating and overall profitability, CRISIL stated.
In June 2023, the Mumbai-based private bank raised Rs 1,500 crore by issuing Tier-II bonds for a tenor of 10 years with a call option at the end of five years and carrying a coupon of 8.4 per cent.
Last week, IDFC First Bank raised Rs 3,000 crore in equity capital from institutional investors through a Qualified Institutional Placement (QIP). It issued 330.40 million equity shares (with a face value of Rs 10 each) at a price of Rs 90.25 per share. This included a premium of Rs 80.25 per equity share. The issue opened on October 3, 2023, and closed on October 6, 2023, according to a filing with the BSE.
After the fresh capital raise, the bank’s standalone capital adequacy ratio, based on the financials of June 30, 2023, would increase to 18.56 per cent, the bank mentioned in a statement.
Some of the key investors in the QIP included Aditya Birla Sun Life Insurance, Bajaj Allianz Life Insurance, ICICI Prudential Life Insurance, and Morgan Stanley Asia, as per the BSE filing.
Its capitalisation is robust, as reflected in an overall capital adequacy ratio (CAR) of 16.96 per cent with a Tier-I capital adequacy ratio of 13.70 per cent as of June 30, 2023. The bank’s assets stood at Rs 1,71,578 crore, of which retail-funded assets amounted to Rs 1,18,071 crore as of June 30, 2023.