SBI raises $1 bn in overseas bonds issue

Will deploy funds for global lending, to acquire targets abroad.

State Bank of India (SBI), the nation’s biggest lender, has raised $1 billion (nearly Rs 4,700 crore) from overseas investors after selling bonds that will mature in five years. The bank will use the proceeds to fund the expansion of Indian companies overseas as well as its own growth outside India, including acquisitions.

The bond sale, executed through SBI’s London branch, was subscribed 4.8 times and saw demand from over 350 investors, the bank said in a statement issued here. The debt will carry a coupon of 4.50 per cent per annum, the same as SBI’s previous $750-million (over Rs 3,500-crore) bond offering of October 2009.

SBI said the total order book was in excess of $4.5 billion. Investors based in the US received 55 per cent of the allocation, while Asian investors were sold 28 per cent of the bonds. The balance 17 per cent was spread across European investors.

The bond sale follows similar offerings by ICICI Bank and Bank of India for $500 million (over Rs 2,340 crore) each, as well as by Bank of Baroda and Axis Bank for $350 million (over Rs 1,640 crore) each.

SBI’s latest offering was successful despite more volatile market conditions related to the ongoing sovereign debt crises and renewed concerns on a double-dip in global economic growth, the statement cited SBI Chairman O P Bhatt as saying.

“This is a signature deal, despite market turbulence and volatility. We believe the success of this transaction will also allow other Indian issuers to more easily access the US. markets,” Bhatt said.

In terms of investor type, asset and fund managers subscribed to 63 per cent of the deal, commercial and investment banks nine per cent, private banks 15 per cent and insurance/pension funds subscribed to four per cent. The bonds are rated ‘Baa2’/Stable by Moody’s and ‘BBB-’/Stable by Standard & Poor’s.