In a significant move to bolster its financial position and support future growth, Bank of Baroda (BoB), one of India’s largest public sector banks, has announced plans to raise substantial capital through debt instruments and long-term bonds.
The bank’s board of directors has approved the raising of up to Rs. 7,500 crore via debt capital instruments and an additional Rs. 10,000 crore through long-term bonds.
Bank of Baroda Raises Additional Capital: Rs. 7,500 Crore in Debt Instruments and Rs. 10,000 Crore in Long-Term Bonds
The debt capital instruments will include Additional Tier 1 (AT1) and Tier 2 bonds, which will be issued in suitable tranches up to March 31, 2025, and beyond if found expedient. This capital infusion is expected to strengthen the bank’s capital adequacy ratio and support its growth plans.
According to a filing with the Bombay Stock Exchange (BSE), the bank’s board has also approved the raising of long-term bonds for financing infrastructure and affordable housing projects, aggregating up to Rs. 10,000 crore. These bonds will be issued in single or multiple tranches during the financial year 2024-25 and beyond, as per the bank’s needs.
The move comes at a time when the banking sector is facing challenges due to the ongoing economic slowdown and the impact of the COVID-19 pandemic. Bank of Baroda’s decision to raise additional capital is seen as a proactive step to ensure the bank remains well-capitalized and is positioned to support its customers and the economy.
In its annual report for FY2023, Bank of Baroda had already raised additional Tier 1 capital of Rs. 2,474 crore and issued Tier 2 capital of Rs. 5,000 crore. The bank’s capital adequacy ratio stood at 16.31% as of March 31, 2023, which is above the regulatory requirement.
The bank’s financial performance has been steady, with a net profit of Rs. 4,886.49 crore in Q4 FY2023, a growth of 2.33% compared to the same period in the previous year. The bank’s total income for the quarter stood at Rs. 33,774.87 crore, up 15.18% year-on-year.
The stock market reacted positively to the announcement, with Bank of Baroda’s shares closing 1.37% higher at Rs. 273.85 on the National Stock Exchange on July 5, 2024. The bank’s market capitalization stood at Rs. 1.39 lakh crore as of the same date.
Bank of Baroda has been rated “BBB-” with a stable outlook by Fitch Ratings as of April 16, 2024. The bank has a strong domestic presence with 8,243 branches and 11,033 ATMs and Cash Recyclers, and a significant international presence with a network of 91 overseas offices in 17 countries.
As of March 31, 2023, the Government of India held a 63.97% stake in Bank of Baroda. The bank’s financial performance and capital adequacy position have been closely watched by investors and analysts, and the latest capital raising plans are expected to further strengthen its position in the Indian banking sector.
In conclusion, Bank of Baroda’s decision to raise additional capital of up to Rs. 7,500 crore via debt capital instruments and Rs. 10,000 crore through long-term bonds is a strategic move to support its growth plans and ensure it remains well-capitalized in the face of economic challenges. The bank’s strong financial performance and capital adequacy position make it well-positioned to capitalize on future growth opportunities in the Indian banking sector.
