Union bank

Union Bank of India plans to raise Rs 1,500 crore through AT1 bond

Union Bank of India is seeking to raise up to Rs 1,500 crore of capital through Tier I bonds and another Rs 1,100 crore through Indian Renewable Energy Development Agency (IREDA) through bonds in the medium term in the coming week.

Debt market sources said that 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.

CRISIL Ratings assigned “AA/stable” to Union Bank Tier I bonds. The overall ratings continue to reflect the expectation of strong support from the majority shareholder, the Government of India (GoI) and the considerable scale of the bank’s operations. These strengths are partially offset by modest asset quality and a modest, albeit improving, earnings profile.

The bank had a capital adequacy ratio of 13.92% with a level I of 11.75% at the end of December 2021.

As for IREDA, India Ratings has assigned an “AA+” rating to its borrowing program for the current financial year.

The ratings continue to reflect the systemic importance of IREDA to the Government of India given the need to address issues related to renewable energy (RE) project financing.

IREDA’s capital adequacy ratio remained above the regulatory benchmark (by 13%) at 17.12% in FY21. IREDA needs increased capital injections to improve its capital cushion necessary for growth and better provisioning.

IREDA’s leverage (debt/equity) decreased by 8.01x in FY21, compared to 8.67x in FY20, thanks to an increase in equity after having recorded strong profits.

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