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Informist, Wednesday, Nov. 13, 2024

 

--Sources: SBI likely to tap market with infra bond next week

--Sources: SBI plans to raise up to INR 100 bln via 15-year infra bond issue

 

By Sachi Pandey

 

MUMBAI – State Bank of India, the country's largest lender, plans to raise up to INR 100 billion through infrastructure bonds next week, sources in the know told Informist. This would be the third tranche of infrastructure bond issue by SBI in the current financial year.

 

"They have the board's approval for the issuance, and they will likely announce the bidding today (Wednesday) itself. Bidding will be mostly on Monday for this issuance," said a source closely involved in the transaction. 

 

Sources said the bank plans to offer bonds maturing in 15 years. The issuance is likely to have a base size and greenshoe option of INR 50 billion each. "There is some work going on, some small details. I think the exchange filing will happen at some time today (Wednesday)," another source told Informist on the condition of anonymity.

 

So far this financial year, the lender had raised a total of INR 200 billion through two offerings of infrastructure bonds. Both the bonds had a maturity of 15 years and were issued at a coupon of 7.36%. For the coming issue, the bank could lock in a low coupon in the range of 7.10-7.15%, sources say.

 

SBI's infrastructure bonds are rated 'AAA' by CRISIL Ratings.

 

On Friday, the bank's Chairman C.S. Setty said the board's approval to raise INR 200 billion through long-term bonds was for lending to the infrastructure sector. "This is mainly for infrastructure. We have a very significant infrastructure book and there is a good amount of interest among investors for this particular instrument. We would like to access the market and will be coming out with this," Setty said. 

 

For the quarter ended September, the bank announced a 27.9% year-on-year increase in its net profit at INR 183.31 billion.

 

Banks, including SBI, Indian Bank, Canara Bank, and ICICI Bank, have raised a total of over INR 535 billion through infrastructure bonds so far this financial year to meet their funding requirements. Last week, Federal Bank tapped the bond market to raise INR 15 billion through bonds maturing in 10 years at a coupon of 7.76%.

 

Banks and financial institutions issue infrastructure bonds to finance long-term infrastructure projects with a minimum maturity period of seven years. Usually, funding projects through infrastructure bonds is cheaper for banks, as these are eligible for some regulatory dispensation.

 

As an incentive for banks, the Reserve Bank of India exempted borrowing through infrastructure bonds from the mandatory statutory liquidity ratio and cash reserve ratio requirements. Broadly, the end use of infrastructure bonds is specific such as for investing in the infrastructure sector or investment in the affordable housing sector. 

 

At 1230 IST, shares of SBI were down 1.3% at INR 816.45 on the National Stock Exchange.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Avishek Dutta

 

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