SBI may issue more retail bonds if first sale successful

State Bank of India (SBI) is planning to raise more funds through retail bond issuances, depending on the success of its first issue that will be launched on October 18, said a source close to the development. “We will look towards issuing bonds to retail investors in tranches. First, we want to see how successful this retail bond issue is,” the source said. The country’s largest lender aims to raise at least Rs 500 crore through its retail bond sale.

SBI has the headroom to raise Rs 30,000 crore through tier-II bonds and Rs 6,000-7,000 crore of perpetual bonds, the source added. As on June 30, the bank’s tier-I capital adequacy ratio was at 8.8 per cent and overall capital adequacy was at 13.54 per cent. Most merchant bankers said SBI would mop up the amount quickly and for a bank as big as SBI, the issue size was very small. The state-owned bank has typically raised at least Rs 1,000 crore through a single bond issue in the private placement market.

SBI’s Chairman O P Bhatt had said last month the retail bond issue would be small in size as the bank was just trying to test the appetite of retail investors. According to S S Ranjan, the chief financial officer and deputy managing director, the bank will offer 10-year and 15-year bonds to retail investors and was likely to pay a coupon of 8.75 per cent on the 10-year bonds and a nine percent coupon on the 15-year bonds.

Citibank, Kotak Mahindra Capital Co, and SBI Capital Markets would be the lead managers of the issue. These bonds are rated AAA/Stable by Crisil and Care AAA by Care.