State Bank of India Successfully Raises Rs 5,000 Crore through Basel III Compliant Bonds
The State Bank of India, the country’s largest lender, has successfully raised Rs 5,000 crore through its second Basel III compliant additional tier 1 (AT1) bond sale in the current fiscal year.
Bond Details
The bank issued perpetual bonds with a call option after 10 years and subsequent anniversaries, priced at a coupon rate of 8.34 per cent.
Investor Response
The bond sale received a strong response, with an oversubscription of 2.65 times. Investors, including mutual funds, provident and pension funds, banks, and insurance companies, participated with 108 bids totaling Rs 5,294 crores against the base issue size of Rs 2,000 crore.
Chairman’s Perspective
Dinesh Khara, the Chairman of State Bank of India, expressed satisfaction with the tight pricing and the diverse investor base. He noted that the high level of response reflects the trust investors place in the bank, especially considering the challenges associated with this type of financial instrument.
Decision and Coupon Rate
Due to the overwhelming demand, the bank decided to accept bids of Rs 5,000 crore at a fixed coupon rate of 8.34 per cent, payable annually.
Credit Rating
The bonds were rated AA+ with a stable outlook, indicating a strong creditworthiness of the issued securities.
Significance of the Issuance
The issuance holds significance as it allows the bank to diversify its capital and raise long-term non-equity regulatory capital, contributing to its financial stability and growth.
