State Bank of India raises Rs 10,000 crore via infra bonds at 7.54%

Prices issue at finer rate amid hardening yield; Gets bids worth Rs 21,698 crore


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Abhijit Lele Mumbai

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State Bank of India, the country’s largest lender, has raised Rs 10,000 crore through 15-year infrastructure bonds, priced at a finer rate of 7.54 per cent amid hardening yields due to a hawkish stance taken by the Japanese central bank.

SBI executives said the yield was lower than the 7.7 per cent for infrastructure bonds issued by the bank in January.

While market yields rose last week, they did not affect the pricing much.

The US Fed rate action and a surprise change in the Bank of Japan’s stance to raise its cap on 10-year government-bond yields were a spoiler, SBI executives added.

SBI in a statement said the coupon of 7.54 per cent represented a spread of 13 basis points over the corresponding government securities (G-Sec) curve. The bank’s bond raising in January, of Rs 9,718 crore, was at a spread of 17 basis points over the corresponding G-Sec curve. Its maiden infrastructure bond issuance was in December 2022. It had raised Rs 10,000 crore at a coupon rate of 7.51 per cent. The tenor of the bond issuance was 10 years.

The bank has an AAA credit rating with a stable outlook from domestic credit-rating agencies for these instruments. The proceeds of the bonds will be utilised in enhancing long-term resources for funding infrastructure and affordable housing.

The bond offer has two components -- a base issue size of Rs 5,000 crore and a greenshoe option also of Rs 5,000 crore. The issue attracted an overwhelming response from investors with bids of Rs 21,698 crore and was subscribed 4.34 times against the base issue size, SBI said.

The number of bids received was 115, indicating wide participation. The investors were provident funds, pension funds, insurance companies, mutual funds, companies, etc.

The current offer is the first issue of long-term bonds by any bank for this tenor (15 years) this financial year. This issue may help in developing a long-term bond curve and encouraging banks to issue bonds of a longer tenor, it added.

First Published: Jul 31 2023 | 8:18 PM IST

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