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Bank of Baroda to raise Rs2,500 crore via bond issue news
22 December 2007

Mumbai: Public sector Bank of Baroda will raise around Rs2,500 crore in the next few months to fulfil new capital requirements, reports quoting bank officials said.

BoB has filed documents with the stock exchanges to raise $500 crore in perpetual bonds, $1,500 crore in upper-tier 2 debt and Rs500 crore in lower-tier 2 bonds.

BOB Capital Markets, the merchant banking arm and a wholly owned subsidiary of the bank, is the sole banker to the issue.

CRISIL has assigned AAA/Stable rating to BoB's Rs500 crore perpetual tier I bonds and Rs1,500 crore upper-tier II bonds and Rs 500 crore lower-tier II bonds.

The rating agency has also reaffirmed AAA/Stable on the bank's Rs20,000 crore lower-tier II bonds, Rs1,000 crore lower-tier II bonds, Rs600 crore lower-tier II bonds.

CRISIL's ratings of BoB's debt instruments continue to reflect the bank's strong market position, healthy resource profile, comfortable capitalisation, sustained improvement in asset quality, and expected support from the government. These rating strengths are partially offset by the bank's average earnings profile.

The ratings on the bank's perpetual bonds and upper Tier II bonds take into account the distinguishing features of the instruments, such as conditional debt servicing. For rating these two instruments, CRISIL has centrally factored in the bank's current and projected capital adequacy and profitability.

While the government's shareholding in the bank at 53.81 per cent is close to the regulatory minimum of 51 per cent, CRISIL believes that BoB's strong accruals to net worth will enable the bank to maintain comfortable capital adequacy levels in relation to its asset-side growth plans. The ratings also factor in the bank's stated policy of maintaining a minimum tier I capital adequacy ratio of 8 per cent at all times.

BoB is the fifth-largest bank in India in terms of asset size; it has a share of over 4.25 per cent in total deposits and around 4 per cent in total advances of all scheduled commercial banks.

The bank had a tier I capital base of Rs7,607 crore as of 31 March 2007; its tier I CAR, as a proportion of risk-weighted assets, stood at 8.83 per cent as of 30 September 2007. The bank had a net worth of 16.8 times for net non-performing assets as of 31 March 2007.

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Bank of Baroda to raise Rs2,500 crore via bond issue