Bank of India, a state-run lender, said it has revived its plan to sell Rs 400 crore worth bonds, after being forced to abandon an earlier move, as the debt markets turned volatile on the government’s additional borrowing plan.
Bank of India plans to enter the market tomorrow to raise funds through sale of Tier-I perpetual bond series with the primary option of raising Rs 200 crore and a green shoe option of an equal amount, the lender said in a statement. The issue will close on February 4. The lender had earlier this month announced plans to sell the bonds offering 9 per cent coupon, but withdrew the plans after bond yields rose narrowing the gap between the sovereign debt and corporate debt. “We had to keep the plan on hold due to sudden rise in yields which would have meant offering higher coupon. The yield went up sharply as additional government borrowing plan came as a surprise to the market,’’ a Bank of India official said.
India announced an additional Rs 15,000 crore worth of borrowings for January to partly bridge the gap arising out of the stimulus package.
The government said it will borrow Rs 4,000 crore of 7.56 percent bond maturing in 2014, Rs 3,000 crore of the 8.24 percent bond maturing in 2018 and another Rs 3,000 crore of a new 30-year security. Bond markets also witnessed higher volatility after the central bank cut interest rates on January 2.
Meanwhile, Punjab National Bank, which entered the market on January 7 with an issue of Rs 150 crore worth perpetual bonds and an option to borrow Rs 150 crore more, managed to raise only Rs 220.50 crore.