SBI yet to decide on next retail bond issue

The change of guard at State Bank of India (SBI), India’s largest bank, appears to have resulted in a change in the bank’s fundraising plans.

In February, former chairman Om Prakash Bhatt had said that the bank planned a retail bond issue (subordinated bonds or lower Tier-II bonds) each quarter.

But in the current quarter, no such issue is on the anvil.
In fact, the bank has not decided when will be the next retail bond issue. “We have not decided when the next retail bond issue will hit the market,” a senior SBI official told DNA Money.
When reminded of Bhatt’s statement, the official said, “I do not have any comments on that. We are yet to decide on the next retail bond issue.”

The bank had made a retail bond issue in each of the last two quarters. The first one was in October, worth `1,000 crore, while the second one, in February, mopped up `2,000 crore. Both the issues were oversubscribed due to investors’ faith in SBI and good returns on these bonds.

In the October issue SBI had offered 9.25% coupon rate on a 10-year bond and 9.5% on a 15-year bond.
In the February issue, it offered a 9.75% coupon rate on a 10-year bond and 9.95% on a 15-year bond.

According to the issue arrangers, if SBI comes up with a bond issue now, it will end up incurring a much higher cost of borrowing.

“The yields have moved up by around 50 basis points since the last time they (SBI) did a bond issue,” said Ajay Manglunia, senior vice-president, Edelweiss Securities.