State Bank of India (SBI), the country’s largest lender, raised Rs. 10,000 crores at a coupon rate of 7.54% through its third infrastructure bond issuance, bidding for which took place on 31.07.2023.
The proceeds of bonds will be utilized in enhancing long-term resources for funding infrastructure and the affordable housing segment. The tenor of these bonds is 15 years. This is the first issuance of long-term bond by any bank for this tenor in the current financial year. The issue attracted overwhelming response from investors with bids of Rs. 21,698 crores and was oversubscribed by 4.34 times against the base issue size.
The total number of bids received were 115 indicating wide participation. The investors were across provident funds, pension funds, insurance companies, mutual funds, corporates etc.
Based on the response, the Bank has decided to accept Rs. 10,000 crores at a coupon rate of 7.54% payable annually for a tenor of 15 years. This represents spread of 13 bps over the corresponding FBIL G-Sec par curve. Prior to this, the Bank had raised infrastructure bonds of Rs. 9,718 crores on 19th January 2023 at a spread of 17 bps over the corresponding FBIL G-Sec par curve. The Bank has AAA credit rating with stable outlook from domestic credit rating agencies for these instruments.
This issuance is also very significant as despite the recent hardening of yields, the Bank has been successful in raising 15 years Long Term Bond successively at a finer spread and it will help the Bank in lending long term to infrastructure. We believe that this issuance may help in developing a long-term bond curve and encourage banks to issue bonds of longer tenor.