State Bank of India priced the country’s biggest offering of local-currency Tier 2 bonds yet as the lender boosts its capital buffers amid the worsening financial health of domestic companies.
It is this year’s first bond sale by the country’s biggest mass-lender, and the offer should draw large domestic institutional investors, such as Life Insurance Corporation of India and the Employees’ Provident Fund Organisation (EPFO).
Base Size
The base size of the issue has been kept at Rs 2,000 with an option retain subscriptions up to Rs 10,000 crore.
Returns
SBI’s tier-II bonds are likely to offer a yield of 6.65-6.75 percent, with a 15-year maturity. The bonds might come up for bidding on the electronic platform of stock exchanges on August 19.
Call option benefits
The bonds will have a call option, which can be exercised after 10 years, allowing investors to exit before maturity.
Stock Market reaction
Shares of State Bank of India (SBI) rose 2.4 per cent to hit a high of Rs 199.80 on BSE on Wednesday’s trade after ET reported that the state-run bank is raising up to Rs 10,000 crore in a bond sale.
Initial Fundings Plan
SBI has plans to raise up to Rs 20,000 crore equity capital through various means in the current fiscal.
Earlier reforms
State Bank last month cut its loan-growth target to 8% from 10% for the year started April 1, and said it will be cautious on boosting credit.
