State Bank of India to raise $1bn through bond issue in October

India's largest lender, State Bank of India (SBI) is set to raise upto $1bn from the
international market this month through the issue of five year maturity bonds.

This will fill up the immediate fund-requirement of the banking behemoth to fuel its expansion plans in key-overseas markets, primarily setting up of around 40 new
offices and expanding the lending book.

The bond issue, a part of SBI's $5bn Medium Term Notes (MTN) programme launched in 2004, will target investors including banks, insurance companies, hedge funds and private equities in the global market, a senior SBI official told PTI here.

SBI has designed the bond issue through Reg-S route, which means it can target only non-US clients through the bond issue to raise a maximum of $1bn.

The bank plans to launch international roadshows for the programme in the next few weeks and has appointed five leading investment banks — Barclays, JP Morgan, Citi, HSBC and UBS as lead arrangers, the official said.

However, the official declined to give details of interest rate at which SBI would issue bonds to global investors. "We will be giving it (bonds) to the arrangers, who, in turn will distribute among their clients. The issue could be a mix of fixed and floating rate bonds. We are yet to arrive at the coupon rate," the official said.

SBI has so far raised around $2.3bn through the MTN programme. Assuming that the lender will successfully raise $1bn from the current issue, it will still have a headroom to raise $1.7bn when required through the MTN route, the official said.

The banking giant plans to open over 40 new offices globally in the next one year.

Presently the bank has 132 foreign offices including five subsidiaries. Overseas business currently contributes around 12% of SBIs balancesheet.

SBI's international subsidiaries are Indonesia (six branches), Mauritius (12 branches), Nepal (32 branches), California (7 branches) and Canada (7 branches).

Other destinations, where the bank plans to open new offices include Middle East, Singapore, South Africa, Bangladesh, Saudi Arabia, USA, Srilanka, Nepal and Hong Kong.