AU Small Finance Bank raises ₹770 crore capital via Tier-II bond issuance

AU Small Finance Bank, India’s largest small finance bank, today announced the successful completion of capital raise of ₹770 crore via issuance of Tier-II bonds at a coupon of 9.20%. With this fundraise, AU SFB has achieved one of the largest bond issuances by any Small Finance Bank amidst adverse market conditions exacerbated by a tight liquidity environment with deal closing on the last working day of the financial year 2024-25.

The current capital raise is expected to increase the capital adequacy ratio of the bank by around 1%. Overall, the bank said it remains well capitalised and had an overall capital adequacy ratio of 19.9% at the end of Q3 FY25, including interim profits for the first nine months of FY25.

HDFC Bank was the lead manager for the issue and was also the anchor investor for the deal along with Nippon India Mutual Fund. The issuance saw strong participation from various Qualified Institutional Buyers (QIBs) including mutual funds, insurance companies, and pension funds.

AU SFB had launched the issue at a base size of ₹400 crore with a green shoe option. It received an overwhelming response, resulting in subscription of approx. twice the base issue. The bank accepted bids for ₹770 crore, making it one of the largest Tier-II issuances by a small finance bank. These bonds have a 10-year maturity, with a call option exercisable after 5 years from the date of issuance.

"We are delighted with the significant interest in our Tier-II bond issuance. We thank investors for their continuing faith in us amidst a challenging liquidity environment, and specially, to our long-term partner HDFC Bank. They not only lead-managed this issue but also showed support by investing in the capital raise and we thank them for their longstanding partnership,” said Sanjay Agarwal, founder, MD & CEO, AU Small Finance Bank.

“We remain very well capitalized, and the successful completion of this capital raise is a testament to the strength of our banking franchise and the confidence of our investors. The issue proceeds will boost our future growth trajectory and enable us to extend our digitally powered banking products and services across all parts of the country,” Agarwal said.

Earlier, the Board of Directors of AU SFB, at its meeting held on March 7, 2025 approved the capital raise via issuance of Non-Convertible Debentures categorized as Tier II Capital. AU SFB continuously evaluates its capital position as per its business growth plans and had last done capital raise in August 2022 for a total capital of ₹2,500 crore comprising of Tier I capital of ₹2,000 crore and Tier II capital of ₹500 crore.

The bank operates from 2,400 banking touchpoints across 21 states and 4 Union Territories serving 1.1 crore customers with an employee base of 49,000 employees. As on December 31, 2024, the bank has a shareholders’ funds of ₹16,602 crore, deposit base of ₹1,12,260 crore, loan portfolio of ₹1,08,921 crore and a balance sheet size of ₹1.43 lakh crore.