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State Bank of India (SBI) has approached foreign banks regarding the possibility of raising $500 million through a worldwide bond offering, though no definite timeline for this has been determined. It is revealed by the sources familiar with the matter.
The largest financial institution in the country is anticipated to commence discussions with investment banks next week regarding the proposed offering. The size of the offering may be increased depending on the feedback received from investors. The offering is expected to be arranged by banks from Europe, Japan, and the United States.
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An insider stated that State Bank of India has initiated initial discussions with foreign banks to raise approximately $500 million by issuing US dollar-denominated bonds under Reg S/144 A. The bank is seeking to raise funds and is keeping a close watch on the FOMC (Federal Open Market Committee) meeting in early May. On April 18th, the bank’s board approved the issuance of foreign currency bonds to raise $2 billion, and it is projected that the bonds will be issued in stages during FY24.
Indian banks and non-banking financial companies have been consistently utilizing the global market to fulfill their financial requirements for several years. Nevertheless, with global benchmark interest rates, to which the funding expenses are associated, rising considerably from their near-zero levels not so long ago, issuers are required to pay a greater amount proportionately to obtain funds from the international market.
State Bank of India (SBI) is considering raising approximately $500 million via a global bond issuance without registering with the SEC under Reg S/Rule 144A. Due to its quasi-sovereign status, the bank can issue senior debt at a 5% rate. Although SBI has bonds worth $1.4 billion maturing in the near future, it currently has enough liquidity to meet its repayment obligations. The bank obtained board approval to raise $2 billion in foreign currency bonds, and it previously issued its first syndicated social loan of $1 billion in February.
After a brief pause in global bond issuance, REC and ReNew Power have recently raised funds. ReNew Power raised $400 million through a green bond at 8.15%, while REC raised $750 million at 5.659%. However, State Bank of India’s borrowing rate is anticipated to be similar to other banks in the area, and its pricing is predicted to be based on the bond issuance of South Korea’s Kookmin Bank, which raised a five-year bond at 95 basis points above the five-year US treasury rate.
According to insiders, State Bank of India’s bond pricing will factor in its robust reputation and quasi-sovereign status. Sources anticipate that the bank’s bond will be priced at roughly 120-140 basis points above the current five-year US treasury rate of 3.62%, implying a potential rate of around 5% for the bank.
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