State Bank of India plans to raise at least $500 million through a 5-year dollar bond issue, signalling renewed confidence in offshore markets as Indian banks increasingly tap foreign funding channels.
State Bank of India is preparing to return to the public dollar bond market after almost a year away, with bankers expecting solid investor appetite for a 5-year issue that could raise at least $500 million and possibly more if demand proves strong. Initial pricing has been set at about 120 basis points above US Treasuries, and the sale, which will be carried out through the bank’s London branch, is expected to be completed by the end of the week, according to bankers familiar with the plan.
The move comes as Indian banks step up offshore borrowing after the Reserve Bank of India introduced swap facilities in June that made foreign-currency funding cheaper. SBI had previously intended to sell $1 billion of dollar bonds in June, but postponed the deal when borrowing costs rose after a wave of issuance from other Indian lenders. It later raised $600 million through a private placement of 3-year dollar bonds priced at a spread of 100 basis points over the Secured Overnight Financing Rate.
Fitch Ratings has assigned an expected BBB- rating to the proposed senior unsecured notes, which will rank equally with SBI’s other unsecured and unsubordinated debt. One banker told Reuters the issue offers a sizeable spread premium and that the final pricing could tighten by as much as 30 basis points, while the overall size could reach $1 billion or more. The bank did not immediately respond to a Reuters request for comment. Recent dollar bond sales by HDFC Bank, Axis Bank and ICICI Bank underline how active Indian lenders have become in the offshore market.
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