State Bank of India(SBI) is likely to raise capital worth up to ₹10,000 crore through 15-year infrastructure bonds by the end of August or early next month as the country’s biggest mass lender looks to garner long-term funds for infrastructure projects.
“They (SBI) are likely to come out with a fresh infrastructure bond issue with a maturity of 15 years for up to ₹10,000 crore. The timing would likely be around the end of the month or early in September, after looking at market conditions following events such as the MPC meet and the inflation numbers,” a source aware of the development, said.
“The bonds would have a rating of AAA from India Ratings and ICRA. The 15-year maturity is still relatively new, no other bank is doing it and the investor response showed that there is robust demand. They (SBI) are actively looking to develop that curve,” the source said.
On July 31, the country’s largest bank sold 15-year infrastructure bonds worth ₹10,000 crore at a coupon of 7.54%, an aggressive spread over the comparable government security curve of such a tenure as investor demand was strong. The investors included provident funds, pension funds, insurance companies, mutual funds, and corporates.
The total bid book was ₹21,698 crore, which was 4.34 times the base issue size. The spread for the debt issuance was 13 basis points on the 15-year curve, marking the lowest such gap. In the banking sector, bonds issued by SBI typically bear the lowest coupons, given its government ownership and status as the largest lender in the country.
While detailing its first quarter results, SBI’s top management guided for credit growth of more than 15% in the current fiscal year, saying demand in retail loans would be complemented by a healthy corporate loan pipeline of more than ₹3.5 lakh crore. The corporate line pipeline exceeded an estimate of ₹3.3 lakh crore in March, with the bank saying that sectors such as manufacturing, renewable energy, ports, and airports were generating demand.
RAPID INFRA PRESENCE
Accounting for the bond sale conducted in July, SBI’s outstanding issuance of infrastructure bonds stands at ₹29,718 crore. The total outstanding of such bonds issued by banks is currently at ₹1.35 lakh crore, data provided by industry sources showed.
Of that, ICICI Bank’s share stands at ₹42,019.40 crore, while Axis Bank and HDFC Bank’s outstanding are at ₹23,480 crore and ₹ 23,675 crore, respectively, data showed. IDBI Bank and Punjab National Bank have issuances of ₹5,000 crore and ₹2,800 crore, respectively, while Kotak Mahindra Bank’s share stands at ₹3,845 crore, the data showed.
Once SBI’s upcoming bond sale is conducted, the outstanding amount of infrastructure bonds issued by the lender would be close to that of ICICI Bank, with the state-owned lender rapidly making strides in the space in only a few months.
On December 2, 2022, SBI issued its maiden infrastructure bonds, raising ₹10,000 crore via 10-year papers. Subsequently, on January 18, 2023, the bank issued ₹9,718 crore of 15-year infrastructure bonds, marking the first instance of that tenure for such debt.
Infrastructure bonds are long-term debt instruments with a maturity of at least seven years. Given that these instruments are used for providing finance to the infrastructure sector, banks do not have to maintain Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) on them, according to Reserve Bank of India norms.