SBI May Issue Third Tranche Of 15-Year Infra Bonds By Next Week

State Bank of India plans to raise up to Rs 10,000 crore through the issue of infrastructure bonds and may tap the bond market by next week, according to three persons aware of the matter.

The bonds are likely to have a maturity of 15 years as it was in the case of its previous two issuances earlier this year, one of the persons told NDTV Profit on the condition of anonymity.

The infrastructure bond issuance is likely to have a base size of Rs 5,000 crore and a greenshoe option of Rs 5,000 crore. The state-owned bank may upload the bond issue on the electronic bidding platform next week.

Market participants are expecting SBI's upcoming 15-year infra bond to be issued at 7.10–7.15%. The expectation comes in the backdrop of state-owned Indian Railways Finance Corp. raising Rs 1,415 crore on Monday through 15-year bonds at a coupon of 7.15%.

So far in the current financial year, SBI issued two batches of 15-year infrastructure bonds and raised Rs 20,000 crore at a coupon of 7.36%.

Last week, Chairman CS Setty said the state-owned bank would like to access the market for infrastructure bonds as there is sizeable interest among investors. He said that the bank would tap the market to raise Rs 20,000 crore through infra bonds in the second half of the current financial year.

"We got the board approval for Rs 20,000 crore worth of infrastructure bonds, and we have a very significant infrastructure book and there is good amount of interest among investors for this particular instrument," Setty said at the post-earnings conference on Friday.

For the quarter ended September, SBI's infrastructure book grew nearly 9% year-on-year to Rs 4.01 lakh crore.

Gross advances grew at a healthy pace of 15% YoY to Rs 39.2 lakh crore during the quarter, but the pace of deposit growth lagged behind at 9%. The deposits stood at Rs 51.2 lakh crore at end of the quarter.

Banks and financial institutions raise funds through infrastructure bonds to finance their long-term infrastructure projects. These bonds have a minimum maturity of seven years and are eligible for some regulatory exemptions, such as mandatory requirements of statutory liquidity ratio and cash reserve ratio. Affordable housing loans also qualify for lending against infrastructure bonds.

Shares of SBI closed 2.52% lower at Rs 826.40 apiece on the BSE, compared to a 1.03% decline in the benchmark Sensex.