SBI raises $500 million through 5 year bonds from international investors

State-owned lender also raises Rs 10K cr through 15-yr infra bonds at 7.23%

State Bank of India (SBI) has raised $500 million via five-year bonds from international investors through its London branch at a very fine pricing, with the state-owned lender receiving as much as $3 billion in bids for the debt sale, said sources aware of the development.

 

The bonds have been priced 82 basis points (bps) above the US Treasury, sources said. The initial pricing guidance for the issuance was 115 bps over the US Treasury but the state-owned lender managed to compress the pricing and the final pricing guidance came in at T+ 82 bps, managing a compression of 33 bps. One basis point is one-hundredth of a percentage point.

 

 

The spread at which SBI has raised funds is one of the tightest spreads witnessed by an Indian financial institution, according to sources. The order book for the issuance was close to $3 billion, indicating good demand from global interest.

 

SBI, India’s largest lender, will use the proceeds of the issuance for general corporate purposes, and to meet the funding requirement of its foreign offices/branches. HSBC was one of the arrangers of the issue.

 

Previously, the state-owned lender had raised $600 million in January from global investors by selling five-year papers. The bonds were priced 117 bps over the US Treasury.

 

Sources said, spreads for issuances by Indian banks have compressed substantially. SBI’s January issuance was at T+117 bps, since then the spreads have swung both ways. Over the last two weeks, spreads compressed significantly and SBI was very nimble and quickly capitalised on it. 

 

Separately, SBI on Monday raised Rs 10,000 crore through 15-year infrastructure bonds at a coupon rate of 7.23 per cent. This was the seventh infra bond issue by the bank.

 

The issue attracted overwhelming response from investors, with bids in excess of Rs 11,500 crore, and was oversubscribed in excess of 2 times against the base issue size of Rs 5,000 crore, SBI said in a statement.

 

“The total number of bids received was 85, indicating wider participation with heterogeneity of bids. The investors were across provident funds, pension funds, insurance companies, mutual funds, etc.,” the lender said, adding that the proceeds of bonds will be utilized in enhancing long-term resources for funding infrastructure and in affordable housing segment.

 

Market participants said corporate bond yields have increased by approximately 10 bps, generating renewed investor interest. Earlier this month, REC (Rural Electrification Corporation) raised Rs 3,000 crore through the issuance of 15-year bonds at a tight pricing of 7.09 per cent. Additionally, Indian Railway Finance Corporation (IRFC) raised Rs 1,415 crore through bonds maturing in 15 years at a coupon rate of 7.14 per cent.

 

“SBI concluded another infrastructure bond issuance (third tranche this financial year) with an aggressive cut-off yield of 7.23 per cent. The spread of just around 18 bps over corresponding sovereign government bond yields highlights the robust appetite among long-term corporate bond investors in India. With this tranche, SBI has successfully mobilised Rs 30,000 crore through infrastructure bonds in the current financial year (FY25),” said Venkatakrishnan Srinivasan, founder & managing partner, Rockfort Fincap LLP.

 

Despite the sizable supply of these instruments, the demand for such top-tier credit securities remains unwavering, reflecting the confidence of investors in SBI’s credit quality and the overall resilience of the bond market, he said, adding that the state-owned lender’s focus on supporting credit growth has prompted the bank to explore funding opportunities in both domestic and offshore markets.

 

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

 

SBI, during its Q2 earnings, had said that the lender will raise long-term bonds up to an amount of Rs 20,000 crore through a public issue or private placement during FY25.

 

In the September quarter (Q2FY25), the bank raised Rs 10,000 crore by issue of long-term bonds and Rs 15,000 crore by Basel-III-compliant Tier 2 Bonds in the nature of debentures, the bank has said.

 

State-owned banks have increasingly tapped the domestic capital market to raise funds through infrastructure bonds to fund credit growth as deposit mobilization 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 sizable amounts through infra bonds in the current financial year.

 

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.