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Anirban Nag
Mumbai, Aug 16: Bank of Maharashtra (BoM) is entering the market with a subordinated debt issue on August 23 to boost its tier-II capital. The Pune-based public sector bank will issue the bonds for a 80-month tenure, a merchant banker to the issue said.
The bank is expected to raise Rs 100 crore with a greenshoe option of Rs 70 crore carrying a coupon of 12.60 per cent. The interest is payable annually. SBI Capital is the lead arranger to the private placement.
According to sources, the application size will be for a minimum of 10 bonds and in the multiples of one bond thereafter. The redemption will be a bullet redemption at par at the end of 80 months.
A host of other banks including some of the State Bank of Indian associates are also proposing to raise money through the tier II route to shore up their capital adequacy requirements in the current financial year, sources said. Foreign banks like Citibank and HSBC have also raised money through Tier II issuances to shore capital adequacy.
Going bythe Reserve Bank of India guidelines, banks are required to attain 9 per cent capital adequacy ratio by March 2000, up from the current level of eight per cent.
Meanwhile, a clutch of public sector banks are ready to tap the equity market. The list includes Punjab National Bank, Syndicate Bank and Andhra Bank besides BOM. Andhra Bank is likely to price its issue at a premium of Rs 2 while Synidcate Bank is planning a par issue, merchant banking sources said.
"These will have to sell their shares at such prices to make their offerings attractive. Otherwise, it is difficult for them to sail through," a merchant banker said.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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