AU Small Finance Bank raises ₹770 Crore capital via Tier-II bond
issuance in a challenging environment
- Anchor investors for the deal were HDFC Bank and Nippon India
Mutual Fund
- One of the largest Tier-II issuances by a small finance bank
Mumbai / Chennai, March 29, 2025: AU Small Finance Bank (AU SFB), India’s
largest small finance bank, today announced the successful completion of
capital raise of ₹770 Cr via issuance of Tier-II bonds at a coupon of 9.20%.
With this fund raise, AU SFB has achieved one of the largest bond issuances by
any Small Finance Bank amidst adverse market conditions exacerbated by a tight
liquidity environment with deal closing on the last working day of the
Financial Year 2024-25.
The current capital raise is expected
to increase the capital adequacy ratio of the Bank by ~1%. Overall, the Bank
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. The issuance saw 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 ₹400 Cr with a green shoe option. It received an overwhelming response,
resulting in subscription of approx. twice the base issue. The bank accepted
bids for ₹770 Cr, making it one of the largest Tier-II issuances by a small
finance bank. 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.
Mr. Sanjay Agarwal, Founder, MD &
CEO, AU Small Finance Bank said,
"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."
Earlier, the Board of Directors of AU
SFB, at its meeting held on Friday, 7th March 2025 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 ₹2,500 Cr comprising of Tier I
capital of ₹2,000 Cr and Tier II capital of ₹500 Cr.
