SBI raises Rs 10,000 cr via infrastructure bonds at 7.49%

Lender gets bids worth over Rs 20,000 cr; pricing cheaper by 5 bps than July offering

SBI Funds Management

Photo: Bloomberg

Abhijit Lele Mumbai

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State Bank of India (SBI) has raised Rs 10,000 crore through 15-year infrastructure bonds priced at a rate of 7.49 per cent. The pricing was five basis points cheaper than coupon fixed at 7.54 per cent for such bonds issued in July.

The yield was 7.7 per cent for infrastructure bonds the bank issued in January.

Bond market dealers said the softening of yields in markets helped SBI to fix coupon at a lower rate. The response for those looking for long-term paper was good and the issue attracted bids in excess of Rs 20,000 crore. The Employee Provident Fund Organisation (EPFO) and insurance companies were major investors.

The bond offer had two components: base issue size of Rs 4,000 crore and a greenshoe option of Rs 6,000 crore.

SBI executives said the new pricing was better than the July offering. The spread over the 15-year India government bond was 12 bps this time as against 13 bps in July.

While news on Friday about India’s inclusion in India in JP Morgan GBI-EM index had little impact, the future issuances of SBI bonds would certainly benefit in the form of cheaper cost of money, they said.

SBI’s maiden infrastructure bond issuance was in December 2022, when it raised Rs 10,000 crore at a coupon rate of 7.51 per cent. The tenor of the bond issuance was 10 years.

With today’s offering, the funds raised through infrastructure bonds is about Rs 40,000 crore in the last and current financial years.

SBI’s board had given approval to raise up to Rs 20,000 crore via infrastructure bonds in Financial Year 2023-24 (FY24). With today’s bond issue, the entire approved amount has been raised. SBI may look at more infrastructure bond offerings for the rest of the financial year, given the pricing benefit and prospects of sticky deposits, said the lender’s executives.

SBI bonds carry an AAA credit rating with a stable outlook from domestic credit-rating agencies for these instruments. The proceeds from infrastructure bonds are exempt from reserve requirements like Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR). The entire amount can be deployed in lending operations. The proceeds of the bonds are utilised in enhancing long-term resources for funding infrastructure and affordable housing.

First Published: Sep 22 2023 | 3:30 PM IST

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