AU Small Finance Bank Raises INR 770 Cr via Tier-II Bonds HDFC Bank played a crucial role as the lead manager and anchor investor for this issuance, alongside Nippon India Mutual Fund.
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AU Small Finance Bank (AU SFB) has announced the raising of INR 770 crore through the issuance of Tier-II bonds at a coupon rate of 9.20%. This marks one of the largest bond issuances by a small finance bank, completed despite challenging market conditions and tight liquidity. The deal closed on the last working day of the Financial Year 2024-25.
The funds raised will enhance the bank's capital adequacy ratio by approximately 1%, further strengthening its financial position. As of Q3 FY25, AU SFB had an overall capital adequacy ratio of 19.9%, including interim profits for the first nine months of the financial year.
HDFC Bank played a crucial role as the lead manager and anchor investor for this issuance, alongside Nippon India Mutual Fund. The issue attracted strong interest from Qualified Institutional Buyers (QIBs), including mutual funds, insurance companies, and pension funds.
Initially launched with a base size of INR 400 crore and a green shoe option, the offering saw an overwhelming response, leading to a total subscription of INR 770 crore—nearly double the base size. The bonds carry a 10-year maturity, with a call option exercisable after five years. The issue has been rated 'AA/Stable' by ICRA and CARE.
Sanjay Agarwal, Founder, MD and CEO of AU Small Finance Bank, said, "We are delighted by the strong response to our Tier-II bond issuance. In a challenging liquidity environment, investor confidence in AU SFB reinforces the strength of our banking franchise. We are particularly grateful to HDFC Bank for their support as lead manager and investor. This capital infusion will enable us to accelerate our growth and expand our digital banking services nationwide."
The bank's board had approved this capital raise on March 7, 2025. AU SFB continuously evaluates its capital position in alignment with its growth plans, with the last fundraising conducted in August 2022, when it raised INR 2,500 crore, comprising INR 2,000 crore in Tier-I capital and INR 500 crore in Tier-II capital.
Founded in 1996 by Sanjay Agarwal, AU Small Finance Bank transitioned into a scheduled commercial bank in April 2017. It has established itself as India's largest small finance bank, focusing on serving retail and MSME customers. With a strong digital banking presence and a network of 2,400 banking touchpoints across 21 states and 4 Union Territories, AU SFB serves over 1.1 crore customers. As of December 31, 2024, the bank reported a deposit base of INR 1,12,260 crore and a total loan portfolio of INR 1,08,921 crore.
Listed on NSE and BSE, AU SFB continues to strengthen its position as a leading financial institution, committed to expanding access to banking services across India.
