The country’s largest lender’s bonds received bids worth more than double the issue size.
State Bank of India said on Wednesday it has raised ₹ 4,691 crore through Basel III-compliant Additional Tier 1 bonds to support business growth. The issuance, the bank’s first Tier I bond sale of the current financial year, carries a coupon rate of 7.75% and a perpetual tenor with a call option after five years and on each anniversary thereafter.
Bids More Than Double the Base Size
The bond issue size was ₹3,000 crore, which received more than double the demand, according to data. State Bank of India (SBI) received 89 bids in total, indicating strong interest from a wide array of domestic and foreign institutional investors, including provident and pension funds, mutual funds, and banks.
A Vote of Confidence
SBI Chairman C S Setty said the breadth and variety of bids reflected the trust investors place in the country’s largest bank. Based on the strength of demand, SBI decided to accept the full ₹ 4,691 crore at the 7.75% coupon rate, payable annually. The bank noted the issuance also helps diversify its sources of long-term, non-equity regulatory capital.
Understanding AT-1 Bonds
As per Basel III norms, AT-1 bonds have a loss absorption feature, under which banks can write-off or convert the bonds into shares during periods of financial stress, subject to the approval from the RBI. These AT-1 bonds are issued as part of capital instruments classified as equity or Core Capital and are issued by the public sector banks to comply with international capital adequacy norms set by Basel III accord.
