SBI looks to raise Rs 10,000 crore through 15-year infra bonds next week

State Bank of India (SBI), India’s largest lender, is looking to raise Rs 10,000 crore through 15-year infrastructure bonds as early as next week, said multiple sources aware of the development.

 

Market participants expect a coupon in the range of 7.15-7.18 per cent for SBI's upcoming infrastructure bond issuance. This comes as demand for longer-tenor papers has remained strong in recent domestic capital market offerings.

 

“Confusion over Securities and Exchange Board of India (Sebi) guidelines on primary issuances led to a lull in the domestic capital market. Sebi has since clarified that recent amendments don’t require board approval for each bond issuance but mandate informing the board before opening the issue. Bond supply is picking up in November, with REC’s tight pricing due to long-term investors showing great interest. With ample liquidity, SBI’s infra bond issue is expected to see strong demand, though it depends on large investors having available investment limits, as SBI has already issued Rs 20,000 crore in infrastructure bonds this financial year,” said Venkatakrishnan Srinivasan, founder & managing partner, Rockfort Fincap LLP. 

 

An email sent to the bank did not elicit a response till going to press.

 

Last week, SBI, during its Q2 earnings, said its central board accorded approval for raising long-term bonds of up to Rs 20,000 crore through a public issue or private placement during FY25. 

 

SBI has previously raised Rs 20,000 crore in infrastructure bonds in the current financial year (FY25). In June this year, SBI raised Rs 10,000 crore through 15-year infra bonds at 7.36 per cent. Additionally, SBI raised another Rs 10,000 crore through 15-year bonds at the same rate.

 

Money raised through infrastructure bonds is advantageous for banks because it is exempt from regulatory reserve requirements such as statutory liquidity ratio (SLR) and cash reserve ratio (CRR).

 

Unlike funds raised through deposits, where banks must maintain 4.5 per cent of the amount as CRR with the Reserve Bank of India (RBI) and invest approximately 18 per cent in securities to meet SLR obligations, infrastructure bond proceeds can be fully deployed for lending activities.

 

In July–September (Q2FY25), the bank raised Rs 10,000 crore by issue of long-term bonds and Rs 15,000 crore by Basel III-compliant Tier-II bonds in the nature of debentures, the bank said.

 

State-owned banks have increasingly tapped the domestic capital market to raise funds through infrastructure bonds to fund credit growth as deposit mobilisation has been a challenge.

 

State-owned banks, such as Bank of Baroda, Canara Bank, Bank of Maharashtra, Bank of India, Indian Bank, and others have also raised sizeable amounts through infra bonds in the current financial year.

 

Separately, the private sector Federal Bank raised Rs 1,500 crore, last week, through its maiden issuance of 10–year infrastructure bonds at a coupon of 7.76 per cent.

 

The total issue size was Rs 750 crore with a green shoe option of Rs 750 crore.

 

Recently, REC raised Rs 3,000 crore last week through the issuance of 15-year bonds at a tight pricing of 7.09 per cent. Additionally, Indian Railway Finance Corporation (IRFC) has raised Rs 1,415 crore through bonds maturing in 15 years at a coupon rate of 7.14 per cent.    IN CONTEXT 

 Market participants expect a coupon of 7.15-7.18% for SBI’s upcoming infra bond issuance

 SBI had previously raised Rs 20K cr in infra bonds in the current year

 In June this year, it raised Rs 10,000 cr through 15-year infra bonds at 7.36%

 It raised another Rs 10,000 cr through 15-year bonds at the same rate

 In Q2FY25, the bank raised Rs 10,000 cr by issue of long-term bonds and Rs 15,000 cr by Basel III compliant Tier-II bonds