Business Standard

State Bank of India raises Rs 5,000 crore in capital via AT1 bonds

Fixes coupon at 8.34%, 24 bps higher than previous offering

SBI, state bank of india

Photo Credit: Ruby Sharma

Abhijit Lele Mumbai

Listen to This Article

State Bank of India (SBI), the country’s largest lender, has raised Rs 5,000 crore in capital through Basel III compliant Additional Tier 1 (AT1) bonds at a coupon rate of 8.34 per cent amid tight market conditions. This was the bank’s second AT1 bond offering in the current financial year. Earlier, it raised Rs 3,101 crore via AT1 bonds in July at a coupon of 8.10 per cent.

SBI executives said the market conditions were tough in terms of appetite. The spread over the benchmark was 102 basis points for this issue as against 96 basis points for the offering in July.

Dinesh Khara, Chairman SBI, in a statement said: “The tight pricing and the diverse investor base for an instrument which has its own challenges show the trust investors place in the bank.”

The issuance is significant as the bank has been able to diversify and raise long-term non-equity regulatory capital, he added.

The tenor of these bonds is perpetual with a call option after 10 years and every anniversary after that. The coupon is payable annually.

The issue attracted an overwhelming response from many investors with 108 bids of Rs 5,294 crore. It was oversubscribed by about 2.65 times against the base issue size of Rs 2,000 crore. Based on the response, the bank has decided to accept bids of Rs 5,000 crore.

The investors were across mutual funds, provident & pension funds, banks, insurance companies. The bonds were rated AA+ with a stable outlook by Crisil and Icra. With a Rs 5,000 crore issue of AT1 instrument, the bank completed the non-equity capital raise plan for FY24. Besides AT1 bonds, the lender also raised Rs 10,000 crore in capital through tier II bonds, SBI executives said.

Its capital adequacy ratio stood at 14.28 per cent with AT1 of 1.84 tier I at the end of September 2023.

Don't miss the most important news and views of the day. Get them on our Telegram channel

First Published: Jan 18 2024 | 6:26 PM IST

Explore News