Investors snap up SBI's overseas bond sale of $1.25bn
State Bank of India today successfully raised USD 1.25 billion from an overseas dollar-denominated bond sale, making it the single largest
issue from the domestic banking in recent years. It was over-subscribed 5.2 times.
July 27, 2012 / 12:10 IST
State Bank of India today successfully raised USD 1.25 billion from an overseas dollar-denominated bond sale, making it the single largest issue from the domestic banking in recent years. It was over-subscribed 5.2 times.
At 3.75% over the US treasury bills, the SBI issue is the cheapest five-year offering by a domestic company till date with the effective coupon rate, payable half-yearly, working out to be just 4.125%, according to Citi India, one of the lead bankers to the bond sale. The fact the issue was snapped up below the bank's own indicative rate of 400 basis points above the treasuries in run-up to the sale, shows the investor interest in the issue."We have just finished a successful bond sale issue, mopping up USD 1.25 billion at 3.75% over the US treasury rate," SBI Managing Director and Group Executive for International Banking Hemant Contractor told PTI.In November 2010, ICICI Bank had raised USD 1 billion from bond sale. SBI, too, had mopped up a similar amount in July 2010.While ICICI's was a 10-year issue, making it the longest tenure, SBI's was a five-year money.The bond sale focuses on the broader opportunity created by this issuance, Citi India Capital Markets Origination Head Rajiv Nayar said."This issuance has provided a window of opportunity to other high quality Indian issuers to tap the international bond markets. The SBI notes offer the lowest ever coupon achieved for an Indian issuer in the US dollar bond market in the five-year tenor and is the largest single-tranche offering
by a public sector bank from the country," Nayar said.On reasons for the runaway success of the issue, over- subscribed by 5.2 times, in a tough investor climate, he said, "the success can be attributed to SBI's consistent track record, identification of a window of opportunity in volatile markets and seamless execution."Stating that issue was received very well, Contractor said over 350 investors participated in the issue, which will be listed in the Singapore Stock Exchange shortly.The issue was launched yesterday in eight overseas markets and was closed by the end of the day. The pricing was fixed early this morning.The geographical spread of the investors are as follows: Asia (47%), US (31%) and Europe (22%). Within them, nearly 50% are fund managers, 25% from privates banks.While 12% are banks and insurance funds, the remaining 2-3% are public companies, according to a Citi spokesperson.Despite a challenging environment, the issue elicited very good response from investors and it was over-subscribed 5.2 times, or worth USD 6.8 billion, said a spokesperson of a lead banker to the sale.The i-bankers to the issue were Bank of America Merrill Lynch, Barclays Capital, Citigroup, Deutsche Bank, JP Morgan and UBS.The SBI had run a week-long marketing campaign in the second week of this month in Hong Kong, Singapore, London, New York, Los Angeles, Boston, Frankfurt and Zurich.The bank has a board mandate to raise USD 10 billion from overseas over the next few years.SBI's successful bond sale can boost the plans of ICICI Bank and Indian Overseas Bank, among other entities, to raise funds through dollar bonds.The sharp plunge in the value of rupee, which recently hit a low 57.32 against the dollar, has already affected bond sale plans of at least two banks - ICICI Bank and Indian Overseas Bank - in the past few months. Both banks had initiated their respective dollar bond plans and hired investment bankers for the same, but the sale plans were delayed amid tough market conditions. While Indian Overseas Bank was aiming to raise about USD 500 million, ICICI Bank was eyeing a USD 1 billion bond sale.So far this year, only USD 4 billion has been raised by major corporates - USD 3.5 billion by Reliance Industries in two installments in February and May and Axis Bank's five-year USD 500 million.The fourth issue, which is underway now, is also from RIL, for another USD 1.5 billion, for which meetings are beginning tomorrow in Singapore.Domestic companies had raised over USD 8 billion through dollar bonds in 2011. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
