SBI to raise up to $1 bn via 5-yr dollar bonds after India's rating upgrade

Don't want to miss the best from Business Standard?

State Bank of India plans to raise funds through the issuance of dollar-denominated bonds with a maturity of five years, three merchant bankers said on Tuesday, days after S&P Global Ratings upgraded India's sovereign credit rating for the first time in 18 years in August.

SBI, the country's largest lender by assets, is eyeing at least $500 million through the issue, and based on the response, could go as high as $1 billion, one of the bankers said.

The issue would be finalised over the next few days, the bankers added.

SBI did not reply to a Reuters email seeking comment, while the bankers requested anonymity as they are not authorised to speak to the media.

The lender has provided an initial guidance of US Treasury yield plus a spread of 105 basis points, but the bankers feel the actual cutoff may come below 100 bps, as the issue is set to receive strong demand.

The notes will be rated 'BBB' by S&P, in line with the issuer's ratings.

Last month, the global rating agency upgraded India's long-term sovereign credit rating to 'BBB' from 'BBB-'.

Yields on dollar bonds of SBI, widely considered as a so-called quasi-sovereign issuer with credit ratings closely linked to the sovereign rating, had dropped after the upgrade, and will benefit the lender for fresh fundraising.

More favourable placement opportunities are arising for state-linked entities and a broader category of banks and non-banking finance companies, said Maksim Zenkov, deputy head of emerging markets fixed income at financial data aggregator Cbonds.

"The upward trend in the government bond yields serves as an additional stimulus to consider tapping the dollar debt market."

In November 2024, SBI had raised $500 million through five-year dollar bonds at a yield of 5.13%, which was at a spread of 82 bps over Treasury yield with similar maturity, the tightest spread achieved by the lender, per bankers.