AU Small Finance Bank (AU SFB) has successfully raised ₹770 crore through the issuance of Tier-II bonds at a coupon rate of 9.20%. These bonds have a 10-year maturity with a call option exercisable after five years from the date of issuance. The bond issuance is rated ‘AA/Stable’ by ICRA & CARE, reflecting the bank’s strong financial position and investor confidence.

This fundraising initiative is set to boost AU SFB’s capital adequacy ratio by approximately 1%, reinforcing its capital base and supporting its expansion plans. The bank reported an overall capital adequacy ratio of 19.9% at the end of Q3 FY25, including interim profits for the first nine months of the fiscal year.

Strong Investor Participation in AU SFB’s Bond Issuance

The bond issuance witnessed robust demand from Qualified Institutional Buyers (QIBs), including:

• HDFC Bank (Lead manager and anchor investor)

• Nippon India Mutual Fund

• Other mutual funds, insurance companies, and pension funds

AU SFB initially launched the issue with a base size of ₹400 crore and a green shoe option to accommodate additional demand. Given the overwhelming response, the issue was subscribed nearly twice the base amount, demonstrating strong investor confidence in AU Small Finance Bank’s financial stability.

Management's Perspective on the Capital Raise

Sanjay Agarwal, Founder, MD & CEO of AU Small Finance Bank, expressed gratitude for investor trust, particularly towards HDFC Bank, which not only managed the issue but also participated as an investor.

"We are delighted with the significant interest in our Tier-II bond issuance. We thank investors for their faith in us amidst a challenging liquidity environment. The successful completion of this capital raise is a testament to the strength of our banking franchise and investor confidence. The issue proceeds will support our future growth trajectory and allow us to extend our digitally powered banking products and services across India."

AU SFB’s Strategic Capital Planning

AU Small Finance Bank continuously evaluates its capital position based on business growth projections. The bank’s last major capital raise occurred in August 2022, when it secured a total of ₹2,500 crore, comprising:

• ₹2,000 crore as Tier-I capital

• ₹500 crore as Tier-II capital

This latest fundraising initiative aligns with AU SFB’s long-term growth strategy, ensuring adequate capital availability for future lending and operational expansion.

Key Benefits of AU SFB’s Tier-II Bond Issuance

✅ Strengthened Capital Base: The additional capital will enhance AU SFB’s capital adequacy ratio by ~1%, ensuring financial stability.

✅ Investor Confidence: Strong participation from leading financial institutions reflects trust in AU SFB’s creditworthiness and growth potential.

✅ Expansion of Digital Banking Services: The funds will support AU SFB’s digital transformation initiatives, improving banking accessibility across India.

AU Small Finance Bank’s Growth Outlook

With this capital raise, AU SFB continues to fortify its balance sheet while pursuing expansion across India. The bank is focused on digital banking innovations, financial inclusion, and business growth, making it a key player in India’s evolving banking sector.

As the bank moves forward, investors and stakeholders will be keenly watching how this funding strengthens AU SFB’s operations, lending capacity, and market positioning in the coming years.

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