Synopsis: The State Bank of India (SBI) plans to raise approximately ₹50 billion ($573.38 million) through Basel III-compliant additional Tier-I perpetual bonds by the end of February 2025. This marks the first such issuance by any lender in over three months.
The State Bank of India (SBI), the nation's largest lender, is preparing to raise around ₹50 billion ($573.38 million) via Basel III-compliant additional Tier-I perpetual bonds before the end of February 2025, according to sources familiar with the matter.
Perpetual bonds are debt instruments without a fixed maturity date, allowing issuers to strengthen their capital base without the obligation of repayment at a set time.
These bonds often come with call options, enabling the issuer to redeem them after a specified period.
For this issuance, SBI is considering a call option at the end of either five or ten years, with the final decision pending investor feedback.
Insurance companies are expected to be among the primary investors in this offering.
Notably, SBI was the last institution to utilize this route in October 2024, successfully raising ₹50 billion at a coupon rate of 7.98%, featuring a 10-year call option.
The anticipated participation of mutual funds in this issuance is attributed to recent regulatory changes.
Earlier in 2024, the Securities and Exchange Board of India (SEBI) allowed mutual funds to value perpetual bonds based on their call option dates.
This adjustment has enhanced the appeal of such debt instruments by providing a clearer valuation framework and reducing net asset value (NAV) volatility for funds holding these bonds.
Conclusion
SBI's planned issuance of ₹50 billion through Basel III-compliant additional Tier-I perpetual bonds underscores the bank's strategy to bolster its capital reserves while leveraging favourable regulatory changes to attract a diverse investor base.
The involvement of insurance companies and mutual funds indicates a robust market appetite for these instruments, reflecting confidence in SBI's financial stability and the evolving landscape of India's debt market.
Disclaimer: This article is for informational purposes only and should not be construed as financial or investment advice. Investing in financial instruments carries inherent risks, and individuals are advised to consult with qualified financial advisors before making investment decisions.
