SBI raises euro 750 mn via bond issue

“The proceeds from the benchmark-size bond issue-its largest ever single tranche bond issue and issued through its London branch — which is part of its policy of diversifying its debt capital market profile,will be used for funding the lender’s euro-denominated assets and for general corporate purposes,” said a statement released by the SBI on Tuesday.

The issue comes as the bank awaits government nod to come out with a Rs 20,000 crore rights issue to further capitalise itself. The permission for the rights issue is expected anytime from now and the issue may hit the market late December or early January.

Bankers feel that the outcome of the second-round of quantitative easing in the United States would be an increased demand for Indian paper where returns are expected to be high — thanks to policy measures by the RBI. “This transaction is the first Asian euro bond issue in 2010 and the first such Indian issue in the past three years. The deal is the largest single tranche bond ever completed by the SBI as well as the largest euro-denominated issue from India and also amongst the largest euro denominated issue by an Asia,ex-Japan,financial institution,” the SBI said.

Recently,top two private sector lenders ICICI Bank and Axis Bank also hit the international market through their bond issues. ICICI Bank floated $1 billion bond issue of 10-year fixed rate notes carrying a coupon of 5.75 per cent against which the bank received order book of $5 billion from over 325 institutional investors. Similarly,Axis Bank in early November has also raised $500 million from bonds subscribed mainly by the US and European banks and pension funds.

“The strong demand generated after a single day’s book-building followed a three-day roadshow and enabled SBI to raise the 750 million euro under challenging market conditions,” the release said. The order book was well diversified both in terms of geography and investor type.

The deal generated euro 1.3 billion worth orders from 180 investors,with nearly a quarter of the demand (24 per cent) coming in from Germany,followed by Britain (21 per cent),France (15 per cent),11 per cent each from the Netherlands,Switzerland and rest of Europe and 7 per cent from Asia.