Canara Bank’s inaugural Long Term Infrastructure Bonds issue exceeds expectations

In a display of investor confidence, Canara Bank’s maiden issuance of Long Term Infrastructure Bonds generated Rs 5,000 crore ($67.8 million), well above the base issue size of Rs 1,000 crore and the green shoe option of Rs 4,000 crore. The bonds, which were launched on Thursday, attracted bids amounting to over Rs 14,180 crore, reflecting strong market interest.

According to InvestingPro, Canara Bank, also known by its ticker CNBK, has seen a revenue growth of 3.21% in LTM2023.Q2, which has been steadily accelerating, it also has a market cap of 1.23B USD and a P/E ratio of 12.34. This financial performance and stability could have played a significant role in the strong market interest for their bond issuance.

The bonds carry an annual coupon rate of 7.54%, an attractive yield in the current financial climate. Canara Bank’s debut issuance was buoyed by high ratings from two leading agencies. Both CARE Ratings Limited and India Ratings & Research Ltd assigned the bonds an “AAA/Stable” rating, as confirmed in a statement released by the bank.

Investors’ robust response to Canara Bank’s first foray into Long Term Infrastructure Bonds underscores the market’s appetite for high-yield debt instruments, particularly those backed by a strong credit rating. The successful issuance also signifies a positive outlook for Canara Bank’s future fundraising endeavors in this segment.

Notably, the bank has been a prominent player in the Banks industry, according to one of the InvestingPro Tips. The same source also suggests that the bank’s stockholders receive high returns on book equity. These factors, combined with the bank’s consistent increase in earnings per share, could explain the investors’ confidence in the bank’s debut bond issuance.

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