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(Updates with details throughout)
By Dharamraj Dhutia
MUMBAI, – State Bank of India (SBI) raised 100 billion rupees ($1.19 billion) on Monday through 15-year infrastructure bonds, with the difference between the coupon and corresponding government bond yield being the narrowest for such an issuance this fiscal year, merchant bankers said.
The country’s largest lender will pay an annual coupon of 7.23% on the issue, the bankers said, adding that the bids totalled over 115 billion rupees.
The 15-year government bond yield was around 7.05% on an annualised basis, indicating a spread of just 18 basis points.
Infrastructure bonds are used to finance long-term development projects.
“There was interest from a wide range of investors like insurance companies, provident funds, some banks, as well as mutual funds. Demand was from across segments,” said Arnab Choudhury, head of debt capital markets at SBI Capital Markets.
“The spread was better than what we had done last time, despite this being a third issue in this financial year.”
SBI received 85 bids, indicating wide participation.
The proceeds will be used to enhance long-term resources for funding infrastructure and the affordable housing segment, SBI said in a statement on Monday.
In June and July, SBI had raised 100 billion rupees each through 15-year infrastructure bonds, at a 7.36% coupon each, with a spread of 21 bps over the government bond yield.
SBI Chairman C.S. Setty said on Monday said the “issuance will help in developing a long-term bond curve and encourage other banks to issue bonds of longer tenor.”
SBI’s infrastructure loans jumped 8.86% in the July-September quarter. It currently has over 4 trillion rupees of outstanding loans in this sector, with the bank expecting more demand for such credit.
Indian banks have raised a record 740 billion rupees through the sale of infrastructure bonds in this financial year, with SBI topping with 300 billion rupees of such notes.
Bankers expect another 100 billion rupees of infra bond issuance from the nation’s largest lender in the next quarter. ($1 = 84.3870 Indian rupees) (Reporting by Dharamraj Dhutia Editing by Abinaya Vijayaraghavan)
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