Union Bank of India Intends to Issue an AT1 Bond to Raise Rs.1500 Crore

In the following week, Union Bank of India plans to raise up to Rs 1,500 crore in capital through tier-I bonds and another Rs 1,100 crore through medium-term bonds from the Indian Renewable Energy Development Agency (IREDA).

Union Bank has indicated that its AT bond offering will have an issue size of Rs 500 crore, with a green shoe option of Rs 1,000 crore, according to debt market sources.

Union Bank’s tier-I bonds have been awarded “AA/stable” by CRISIL Ratings. The bank’s overall ratings continue to reflect the main stakeholder’s strong support, the Government of India (GoI), as well as the bank’s large size of operations. These advantages are tempered by a low asset quality and a moderate, but rising, profits profile.

At the end of December 2021, the bank’s capital adequacy ratio was 13.92 percent, with tier I at 11.75 percent.

For the current financial year, India Ratings has awarded a “AA+” grade to IREDA’s borrowing programme.

In light of the need to resolve challenges connected to the financing of renewable energy (RE) projects, the ratings continue to factor in IREDA’s systemic importance to the Government of India.

In FY21, IREDA’s capital adequacy ratio remained higher than the regulatory benchmark (13%) at 17.12 percent. Increased equity infusions are needed by IREDA to boost its capital buffer, which is required for expansion and better provisioning.

After posting good earnings, IREDA’s leverage (debt/equity) fell to 8.01x in FYE21 from 8.67x in FYE20 due to an increase in equity.