The bank plans to raise funds in the first week of December, two sources said.
SBI is tapping the international markets second time this financial year. While $750 million is underwritten by global banks, an additional $250 million is made available through a green shoe option arranged by global banks including HSBC and JP Morgan.
Spokespersons of SBI, HSBC and JP Morgan did not respond to requests for comment.
The bonds issued by SBI will be benchmarked against five-year US Treasury bonds, and they are likely to be priced at a spread of around 120 basis points above the benchmark with a tenor of five years. The 5-year US Treasury is now at 4.55%.
These funds are being raised under SBI’s $10-billion medium-term note programme. The proceeds will be used for various purposes, including lending, and refinancing existing overseas debt. SBI currently has $800 million worth of instruments maturing in early 2024.
While US bond yields have eased over the past few weeks, with the 10-year yield dropping as much as 30 basis points since October, overseas fundraising still remains a much pricier affair for Indian corporates, given the aggressive rate hikes carried out by the Fed since March 2022. Analysts said that the recent offshore fund-raising plans by state-owned Indian banks could have been due to rollovers of earlier foreign currency issuances or growth in advances of overseas branches. “There could be a situation where maybe an earlier foreign currency MTN (medium-term note) may be due for a rollover,” said Anil Gupta, group co-head at ICRA.
“This is an effort to diversify the investor pool and access the dollar market for better spreads, assuming that most of the hikes have been done and might have better investor appetite,” said Ajay Manglunia head-investment grade group at JM Financial.
In July-September, SBI’s foreign office advances registered growth of 8.1% on-year, crossing ₹5 lakh crore.
“If a PSU bank has a foreign branch, they will lend it out to an Indian corporate as ECB. These ECBs could also be syndicated loans in the overseas branches of Indian banks,” Gupta said.
Following a hiatus in global capital raising, such plans are starting to regain momentum, with Canara Bank and Bank of Baroda recently entering the market.
Canara Bank last week raised $500 million from the overseas market, with HSBC as the lead arranger and bookrunner. This loan comprised two facilities, a $200 million tranche with a tenor of three years and a $300 million tranche with a tenor of three years. The borrowing was offered at a rate of 125 basis points over the secured overnight financing rate (SOFR).
Bank of Baroda raised $300 million, with HSBC leading the arrangement, as reported by ET on November 6.
Earlier this year, SBI obtained board approval to raise $2 billion in foreign currency bonds. In April, SBI secured $750 million through 5-year Regulation S (Reg S) bonds with a coupon of 4.875%.