Investors snap up SBI's biggest overseas bond sale

The State Bank of India on Thursday successfully raised $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 per cent 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 per cent, 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 $1.25 billion at 3.75 per cent 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 $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."