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In a significant financial move, the State Bank of India (SBI), the largest lender in the country, has successfully raised Rs 10,000 crore through the issuance of 15-year infrastructure bonds. These bonds, which were priced at a competitive rate of 7.49 per cent, garnered substantial attention from investors and were oversubscribed by more than five times against the base issue size of Rs 4,000 crore.
The pricing of these infrastructure bonds was notably 5 basis points (bps) lower than the coupon fixed at 7.54 per cent for similar bonds issued by SBI in July. The yield for the newly issued bonds stood at 7.49 per cent, representing a favourable cost of borrowing for the bank compared to the 7.7 per cent yield on infrastructure bonds issued by SBI in January.
Market analysts attribute this favourable pricing to the softening of yields in the market, which allowed SBI to secure lower coupon rates. Investors displayed keen interest in the bond offering, with total bids reaching Rs 21,045.10 crore, reflecting a diverse array of participants, including provident funds, pension funds, insurance companies, mutual funds, and corporates.
The bond offering comprised two components: a base issue size of Rs 4,000 crore and a green shoe option of Rs 6,000 crore. With this successful issuance, SBI has raised the entire approved amount of Rs 20,000 crore for infrastructure bonds in the fiscal year 2023-24 (FY24).
SBI executives noted that the pricing for these infrastructure bonds was an improvement over the July offering, with the spread on the 15-year Government of India bond reduced to 12 bps, compared to 13 bps in July. They anticipate that future bond issuances will benefit from a lower cost of borrowing, thanks to these competitive rates.
SBI's entry into the infrastructure bond market began in December 2022 when it raised Rs 10,000 crore at a coupon rate of 7.51 per cent for a 10-year tenor. With the successful issuance of these 15-year infrastructure bonds, the bank has now raised approximately Rs 40,000 crore through such bonds in the last and current financial years, fully utilizing the approved amount set by its board.
Investors and market experts are closely watching the impact of these developments on SBI's financial performance and India's broader economic landscape, particularly in the context of the evolving bond market conditions.
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