On June 26, 2024, the State Bank of India (SBI) announced that it had successfully raised INR 10,000 crore through its fifth infrastructure bond issuance. This largest bank in the country, issued the bonds at a coupon rate of 7.36%. The bond issuance received an overwhelming response from investors. The total bids received amounted to INR 19,884 crore. This is almost four times the base issue size of INR 5,000 crore. A total of 143 bids were submitted. This shows the wide participation from various types of investors.
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Diverse Investor Participation
Investors included provident funds, pension funds, insurance companies, mutual funds and corporates. This diverse participation indicates the strong confidence in SBI. It also shows the attractiveness of this bonds.
Utilization of Funds
The proceeds from these bonds will be used to enhance long-term resources for funding infrastructure projects and the affordable housing segment. This aligns with SBI’s ongoing efforts to support significant sectors of the economy. Based on this positive response, SBI decided to accept INR 10,000 crore at the 7.36% coupon rate. The interest will be paid annually over a tenor of 15 years. This rate represents a spread of 21 basis points over the corresponding FBIL G-Sec par curve.
High Credit Rating
These infrastructure bonds are rated AAA with a stable outlook. They indicate a high level of creditworthiness. With this issuance, the total outstanding long-term bonds issued by SBI now amount to INR 49,718 crore.
Encouraging Long-Term Bonds
SBI Chairman stated that this issuance will help develop a long-term bond curve. It will also encourage other banks to issue bonds with longer tenors. This is a significant step in developing a more strengthened bond market in India.
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Stock Market Impact
Following the announcement, SBI’s shares closed at INR 845.05 on the Bombay Stock Exchange (BSE). There was an increase of INR 3.20 or 0.38%.
SBI’s successful issuance of INR 10,000 crore in infrastructure bonds shows strong investor confidence. It supports SBI’s strategic goals of funding infrastructure and housing projects. This move is expected to have a positive impact on the overall financial market.
About the Author
Mr. Radhesh Tarang Shah, is a third-year management student at Institute of Management, Nirma University. He has a passion for writing articles and poems. He has experience as a financial analyst, author, news writer, marketer and social worker.
