Bank of Maharashtra raises Rs 259 cr at 7.99% through tier-II bonds

Bank of Maharashtra raised Rs 259 crore through tier-II bonds at 7.99 per cent on Tuesday. The bank was aiming to raise 1000 crore but total bids received were just above Rs 500 crore and that too at higher levels. Only top credit rated banks are getting good investor appetite. Investors are expecting risk-reward, according to market participants. The bonds have been rated ‘AA+’ by CARE and Acuite Ratings.

The issue had a base size of Rs 250 crore and a greenshoe option of Rs 750 crore.

Market participants said that investors were looking for higher rates at around 8.5 per cent, however, Bank of Maharashtra decided to stick with 7.99 per cent due to hesitance to pay a higher rate, ultimately leading to a cap on the raised amount.

The investor appetite for bonds is currently skewed towards top-rated banks, with liquidity tightness and a surge in equity IPOs impacting market sentiments, said market participants. The market expects that as liquidity normalises in the coming weeks and market corrections occur, rates may cool down.

“They were getting more money but at a slightly higher rate. Had they gone to 8.5 per cent, they would have probably got more than 500 crores,” said Ajay Manglunia, managing director and head (institutional fixed income), JM Financial. “The sentiment in the market is slightly low because of the liquidity tightness and a lot of equity IPOs. Right now people are sticking to the better-rated names,” he added.

Earlier, public sector lender Bank of Baroda had raised Rs 5,000 crore through 10-year bonds on November 30. The bank raised the bonds at 7.68 per cent coupon.

The issue had received total bids worth Rs 10,350 crore against a base issue size of Rs 1,000 crore and retained an oversubscription of Rs 4,000 crore. These bonds were rated ‘AAA’ with a ‘Stable’ outlook by CRISIL and India Ratings.

“The Bank of Maharashtra received bids worth only Rs 560 crores at high rates. The sentiment is down because of tight liquidity. Around December 15, the advanced tax outflows will begin, we don’t see the liquidity easing in the current quarter,” a dealer at a state-owned bank said.

The liquidity has remained largely in deficit mode in the current quarter so far. The Reserve Bank of India infused Rs 34,228 crore on Tuesday. The banking system liquidity widened to a near five-year high on November 21 on the back of monthly goods and services tax payments. The central bank had infused Rs 1.74 trillion on that day.