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State Bank of India (SBI) has mobilised $1.25 billion in a dual tranche overseas bond sale, marking the largest investment grade US dollar-denominated bond transaction out of India since August 2012.
This is also the largest dual-tranche offering by a state-owned bank from India.
In the latest offering, SBI raised $750 million through 5-year bonds and $500 million through 10-year bonds.
The total order book of the offering was in excess of $5.9 billion and was oversubscribed 4.72 times with demand from 520 investors, underscoring SBI’s strong credit profile and its position as India’s largest bank.
“We are pleased to see the robust demand for our transaction and the strong perception of our credit by the international investor community. The execution process was swift and ensured a strong momentum to our transaction”, Arundhati Bhattacharya, SBI Chairman, said in a statement soon after the fund raising exercise was completed.
The $1.25 billion mop up has been done through SBI’s London branch. The unsecured bonds were rated Baa3/stable by Moody’s and BBB-/negative by S&P.
The 5-year bond was priced at a spread of 205 basis points over the 5-year US treasury, equivalent to a yield of 3.622 percent per annum while the 10-year bond was priced at a spread of 225 basis points over the 10-year US treasury, equivalent to yield of 4.882 percent per annum.
The five year bonds will mature on April 17, 2019 and ten year bonds will mature on April 17, 2024.
For the 5-year bond, the final order book was over $ 3 billion from 230 investors. In terms of allocation, Asia-based investors received 24 percent of the new Notes; Europe received 23 percent and the remaining 53 percent to the US.
In terms of breakdown by investor type, fund managers took the majority at 70 percent, followed by banks at 15 percent, insurance and central banks taking 6 percent and the remaining 9 percent going to private banks.
For the 10-year bond, the final order book was over $ 2.9 billion from 290 investors. In terms of allocation, Asia based investors received 27 percent of the new notes, Europe received 33 percent and the remaining 40 percent in the US.
In terms of breakdown by investor type, fund managers took the majority at 50 percent, followed by banks at 30 percent and the remaining 20 percent going to insurance, corporates and other investors.
RBI's key policy rates
After the Reserve Bank left the key policy rates unchanged earlier this month, which has pushed up interest rates in the domestic market, the pipeline for forex debt is bulging with public sector heavyweights like OVL, OIL and large private corporates like Bharti queuing up to raise up to $5 billion through bond sales in the US and Europe.
Last month, Bharti reportedly said it would tap the forex debt window for $2 billion by July out of which $400 million will be raised shortly.
According to merchant bankers, despite the spike in interest rates in the West following the US Fed’s tapering talk, domestic companies can still secure credit up to 500 bps cheaper than the onshore markets even after hedging.
ONGC Videsh is also tapping the forex debt window to raise up to $1 billion in bond sale to pre-pay a bridge loan of $2.2 billion it had raised earlier this year for the Mozambique oil blocks. It will be raising the debt by pledging future crude oil production from its overseas assets.
Power Finance Corporation is planning a $500-700 million issue while Rural Electrification Corporation planning to mop up $1 billion, according to i-bankers, and IFCL is eyeing close to $1.5 billion.
Since tapering talk on May 24 last, there were only a few issues including HDFC Bank’s $500 million last year, Bharti’s $400 million equivalent from the Swiss market last month, after the €250-million issue in January and another €750-million issue in December.
The domestic companies’ overseas bond street journey was opened by Indian Railway Finance Corporation in early January with a $500 million issue, which got subscriptions of $3 billion and was priced at a coupon of 3.917 per cent.
After a massive bond sale last year worth $16 billion, up 60 per cent over 2012, the domestic companies have been going slow in tapping international bond market following rising interest rates there.
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