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The country’s largest lender, State Bank of India (SBI), has raised $500 million through dollar bonds from international investors at the tightest-ever spreads over US Treasuries. This comes after India’s sovereign rating was upgraded a few weeks ago by international rating agency Standard & Poor’s to ‘BBB’ from ‘BBB-’.
The final pricing guidance for SBI’s five-year dollar bond was set at 75 basis points (bps) above the five-year US Treasury yield, translating into a coupon rate of 4.5 per cent. This is tighter than the T+82 bps at which the state-owned lender raised $500 million in November 2024.
The initial pricing guidance was T+105 bps over the US Treasury yield, but SBI managed to compress the spreads by 30 bps to bring the final pricing to T+75 bps, said sources aware of the development.
“The issue was oversubscribed by global investors. They could have raised more as well but decided to retain $500 million,” the sources added.
The order book for the issuance exceeded $1.1 billion across 85 accounts. The notes are expected to carry final ratings of ‘BBB’ and ‘BBB-’ from S&P and Fitch, respectively.
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“This was the tightest-ever five-year dollar bond pricing from India. A few years back, HCLTech had raised funds through dollar bonds at T+75 pricing,” one source said, adding that SBI moved swiftly after the recent rating upgrade by S&P, which led to a compression in SBI’s dollar bond secondaries.
“The secondaries tightened by about 9 bps for SBI after the rating upgrade,” the source said.
The arrangers of the issue were HSBC, Citi, JPMorgan, MUFG, Standard Chartered, and SMBC Nikko, the sources added.
Challa Sreenivasulu Setty, chairman of SBI, said: “The successful issuance of $500 million is a testament to the strong appetite for SBI bonds and to the diversified investor base the bank has in offshore capital markets, allowing it to efficiently raise funds from leading global fixed-income investors. The issue has priced at the best-ever spreads for an Indian issuer and reflects the confidence of global investors in India’s growth story in general and the credit quality of the bank in particular. The tight pricing has demonstrated a reduction in borrowing costs for Indian issuers following the improvement in the credit profile and the sovereign rating upgrade.”
Siddharth Sharma, managing director and head of institutional client group, HSBC India, said: “The success of the transaction highlights India’s growth story, its robust financial and banking sector, and the strong fundamentals of SBI. The deal witnessed strong participation from investors across Asia, West Asia, and Europe, which allowed us to tighten by 30 bps to achieve the tightest-ever spread for a five-year dollar bond issuance from India.”
Earlier, in January 2024, SBI had raised $600 million from global investors by selling five-year paper at T+117 bps over US Treasuries.
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