SBI's maiden infra bond issue for Rs 10,000 cr oversubscribed 3.27 times

10-year paper priced at 7.51%, or about 17 bps above benchmark g-sec yield

The country’s largest lender, State Bank of India, has raised Rs 10,000 crore through its maiden issue of infrastructure bonds, for funding projects in segments such as power and roads. The coupon on the 10-year paper was fixed at 7.51 per cent, or about 17 basis points above the yield on government benchmark bonds.

The base issue size was Rs 5,000 crore, with a green shoe option of Rs 5,000 crore. The issue received 143 bids for over Rs 16,000 crore. Provident funds, mutual funds, insurance firms and corporations were prominent investors. The bank has a AAA credit rating from domestic agencies for the instrument.

As for deployment of the money raised from these bonds, SBI has a pipeline of identified projects for which credit has been sanctioned. SBI’s infrastructure loans book grew by 10.81 per cent year on year to Rs 3.67 trillion as of September 2022. Of this, exposure to the power sector was Rs 1.95 trillion and that to roads was Rs 95,614 crore.

SBI Chairman Dinesh Khara said that development of infrastructure is a key priority for the country. These long-term bonds will help the bank in furthering the cause of infrastructure development.

Infrastructure bonds are long-term, fully paid, redeemable and unsecured financial instruments. The minimum maturity period for these bonds is seven years.

The bonds are exempted from computation of net demand and time liabilities (NDTL). Therefore, they are not subject to Cash Reserve Ratio and Statutory Liquidity (SLR) requirements.

Aoart from infrastructure projects, the money can also be used for loans to affordable housing ventures.

Debt market sources said besides SBI, banks that have raised money through infrastructure bonds include Bank of Baroda and ICICI Bank. They have collectively raised Rs 14,600 crore via these bonds so far this financial year (FY23). In FY22, Indian lenders including Axis Bank and HDFC Bank had raised Rs 27,000 crore via infra bonds.