India’s largest lender to sell additional Tier 1 bonds worth up to Rs 6,000 crore, which are expected to be open for subscription at the Navratri festival next week, three people close to it said. folder.
“The announcement of the sale is expected to hit the stock exchanges by Monday and will be auctioned on October 13, the eighth day of the Navratri celebration,” one of the people named above told ET.
ET reported on September 15 that SBI plans to increase Rs 4,000 to 5,000 crore after the successful sweep of Rs 4,000 crore to 7.72% earlier this month.
SBI Capital Market helps the bank to raise funds.
SBI declined to comment. SBI Capital could not be contacted immediately for comment.
The local market for these quasi-equity securities has dried up completely after the capital market regulator imposed stricter valuation standards for mutual funds, once a major category of investors for these papers. .
The bonds offered can offer rates in the range of 7.65 to 7.85 percent with a five-year call that allows an exit option for investors. Its old sets of securities now return around 7.60% in the secondary market, resulting in mark-to-market gains for existing investors. When bond yields fall, prices rise.
The Reserve Bank of India will announce its bi-monthly policy this Friday. According to an ET survey of 24 banks, funds and financial institutions, it could keep its benchmark rates unchanged but establish a roadmap to increase the repo rate, like other global central banks, which will soon end easy monetary policy.
Last week, a seven-day variable pension auction yielded a threshold of 3.99%, which was almost equal to the 4% pension rate.
“The bonds were to be launched in late October or early November. It has now been advanced, it seems, ”said a local corporate bond arranger.
The base size of the second AT1 sale can be set at Rs 2,000 crore with an option to keep subscriptions up to Rs 6,000 crore.
AT1s, also known as perpetual bonds, are added to banks’ equity, unlike perpetual papers issued by a company. These securities do not have a fixed term but generally have a five-year call option that allows an exit route for investors.
These bonds are rated two or three notches below the corporate ratings of any issuer. Both Crisil and India Ratings have rated these proposed AT1 items with AA + (Stable) rating.
“The bank occupies a unique position; the growth of its retail assets as well as the quality of its assets could be better than that of its peers, ”India Ratings said in a note last Friday.
“Its ability to take large exposures at a lower cost due to the cost of deposits being among the lowest, also makes it the preferred lender of most large companies,” he said.
SBI remains the largest bank in India with a deposit market share of around 25.2% in the universe of domestic banks in FY21, compared to 24.7% in FY20.