SBI raises ₹10,000 crore via bonds; stock rises over 1%

Shares of State Bank of India (SBI) rose over 1% in opening trade on Thursday after the country's largest lender informed exchanges that it raised ₹10,000 crore through bonds for the current financial year. The shares of banking heavyweight have maintained their uptrend for four consecutive sessions, undermining weaknesses in the broader market, and gained nearly 5% during the same period.

Extending its gaining streak, SBI shares opened higher at ₹571.70 against the previous closing price of ₹566.20 on the BSE. In the early trade so far, the banking stock gained as much as 1.3% to ₹573.70, while the market capitalisation climbed to ₹5.11 lakh crore.

The shares of SBI touched a 52-week high of ₹629.65 on December 15, 2022, and a 52-week low of ₹499.35 on February 1, 2023. At the current level, the PSU bank stock trades 9% lower than its 52-week high and nearly 15% higher than its 52-week low. In the last one year, SBI shares have delivered flat returns, while it gave negative returns of 6% in the calendar year 2023. In the past six months, the counter lost nearly 1%, while it fell over 5% in a month.

In a post-market release on Wednesday, SBI said that raised ₹10,000 crore at a coupon rate of 7.81% through its first Basel III compliant Tier 2 bond for the current financial year. The bonds were issued for 15 years tenor, with the first call option after 10 years.

As per the release, the issue garnered an overwhelming response from the investors with bids of ₹15,907 crore and was oversubscribed almost 4 times against the base issue size of ₹4,000 crore with 98 bids.

Dinesh Khara, Chairman, SBI said that wider participation and heterogeneity of bids demonstrated the trust investors place in the country’s largest Bank.

“Based on the response, the Bank decided to accept ₹10,000 crores at a coupon rate of 7.81% payable annually for a tenor of 15 years with a call option after 10 years and on anniversary dates thereafter,” SBI says in a BSE filing.

This is the first Tier 2 bond issuance by the state-owned bank in the current financial year. The bank has been rated ‘AAA’ with stable outlook from CRISIL and India Ratings & Research Private Limited for these instruments.

CRISIL in its report said that rating continued to factor in the SBI group’s dominant market position in the Indian banking industry, strong resource profile and adequate capitalisation. The ratings also factored in the continued strong support that the bank is likely to receive from its majority owner, government of India (GoI), both on an ongoing basis and in the event of distress. These strengths were partially offset by the average asset quality of the group, it added.

In September this year, SBI raised ₹10,000 crore at a coupon rate of 7.49% through its fourth infrastructure bond issuance, which will be used for enhancing long term resources for funding infrastructure and affordable housing segment.

Prior to this, the bank raised long term bonds of ₹10,000 crores on August 1, 2023, at a spread of 13 basis points (bps) over corresponding FBIL G-Sec par curve.

Earlier in April this year, SBI had unveiled a plan to raise $2 billion through offshore bonds in single or multiple tranches during the financial year 2023-24.  The PSU lender had said that the capital would be raised through a public or private placement of senior unsecured notes in U.S. dollars or any other convertible foreign currency.

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