Indian state-run lender Bank of Baroda is weighing a dollar bond sale following State Bank of India’s recent successful foreign-currency issue, signalling increased overseas borrowing amid favourable conditions and growing investor appetite.
Bank of Baroda is weighing a dollar bond sale after State Bank of India drew heavy demand for a foreign-currency issue this week, merchant bankers said in Mumbai. The state-run lender, India’s second largest by assets, is considering a dual-tranche offering with maturities of three and five years, and has already shared initial pricing guidance with investors.
According to bankers familiar with the plan, Bank of Baroda is looking at spreads of 120 basis points over U.S. Treasuries for the three-year portion and 130 basis points for the five-year tranche. The bank is said to be targeting $500 million for each maturity, although the size could be increased if demand is strong enough to justify tighter pricing. Bank of Baroda did not immediately respond to a Reuters request for comment.
The move comes as Indian lenders take advantage of cheaper overseas borrowing after the Reserve Bank of India’s swap facility announced in June lowered funding costs. Reuters reported that State Bank of India raised $500 million on Wednesday in a five-year dollar bond at a 5.25% coupon, with orders close to $2.5 billion and pricing tightened to 88 basis points above Treasuries from initial guidance of 120 basis points. Private lenders including HDFC Bank, Axis Bank and ICICI Bank have also tapped dollar markets in recent months. Bank of Baroda plans to issue the notes through its International Financial Service Centre Banking unit at GIFT City, with proceeds earmarked for head-office needs, foreign branches and general corporate purposes. The planned bonds are expected to carry ratings of BBB, BBB- and BBB+ from S&P, Fitch Ratings and CareEdge Ratings respectively.
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