ICICI Bank to raise $250 mn perpetual debt abroad

ICICI Bank is set to become the first Indian entity to raise perpetual debt overseas. The country's second largest bank plans to issue $250 million Tier I perpetual bonds by next week.

The Reserve Bank of India (RBI) on July 21 had allowed banks to issue overseas innovative perpetual debt instruments (IPDI) to augment their Tier I capital and debt capital instruments to boost upper Tier II capital.

Perpetual bonds are irredeemable as they do not have any expiry date. UTI Bank last week became the first Indian bank to raise 15-year subordinated debt overseas.

The $150 million subordinated debt issue was priced at a fixed coupon of 7.25 per cent, equivalent to a spread of 231.5 basis points over the 10-year US treasury bond, or a yield of 7.273 per cent.

ICICI Bank, which grew its loan book aggressively in 2005-06, also has substantial plans to raise funds through perpetual debt issues in the domestic market. It plans to raise Rs 1,000 crore through issue of perpetual bonds in the current financial year.

The bank has demonstrated its ability to raise capital as evident in the two public issues in the last two years (2004-05 and 2005-06) including the issue of overseas American depository receipts. It raised a total of about Rs 11,300 crore during the two years.

The bank's capital adequacy as on June 30 was 12.5 per cent (including Tier I capital adequacy of 8.6 per cent). Based on RBI's draft guidelines issued in February 2005 on implementation of the revised capital adequacy framework (Basel II), its capital adequacy would be about 12.8 per cent(including Tier I capital adequacy of about 9.6 per cent) on June 30.

The finance ministry has estimated that Indian banks would need to raise about Rs 60,000 crore over the next five years as additional capital.