Bank of Baroda raises Rs 2,474 crore by issuing bonds
State-run #BANKBARODA on August 22 said its board has approved raising capital by way of issuance of Basel III compliant Additional Tier 1 (AT-1) bonds. The bank is expected to raise Rs 2,474 crore by issuing bonds at a rate of 7.88% through stock exchanges in single or multiple tranches.
AT-1 bonds are high-yielding annual coupon-bearing perpetual bonds with no fixed maturity date. These bonds can be treated as equity rather than debt with a steady flow of interest forever.
Raising money through issue of bonds
Companies can raise capital either through debt or equity financing. Equity financing involves giving up a percentage of ownership in a company to investors. Debt on the other hand requires borrowing money from a bank or other lender or issuing corporate bonds. The full amount borrowed has to be paid back, plus interest which is the cost of the company.
Ex: Adani group of companies have used debt extensively to fund its operations: #ADANIGREEN has a debt outstanding of 52,832 crores and a debt to equity ratio of 44.4.