SBI Raises $500M in London Bond Issue at Record Low Spread

State Bank of India (SBI) successfully raised $500 million through a ‘Regulation S’ bond issue from its London branch. This issuance secured a 5.25% coupon rate, considered favorable amidst challenging macroeconomic conditions.

The initial price guidance for these bonds stood at approximately 120 basis points over the 5-year US Treasury benchmark. However, strong investor demand led to a significant compression in the spread.

• Final Spread: 88 basis points over benchmark
• Spread Compression: 32 basis points
• Coupon Rate: 5.25%

This marks SBI’s first return to the public dollar market in nearly a year, with the bonds set for listing on SGX-ST, India INX, and NSE-IX. Challa Sreenivasulu Setty, Chairman of SBI, noted that this issue achieved the tightest spread among all Indian public bond issuances since the Reserve Bank of India’s (RBI) swap announcement.

Mr. Setty highlighted that this outcome reflects robust global investor confidence in India’s growth trajectory and SBI’s credit quality. This positive reception comes despite the prevailing difficult macroeconomic environment.

How RBI’s Swap Window Impacts Borrowing

Indian banks have actively pursued dollar issues following the RBI’s introduction of a swap window on June 8. This facility has made overseas borrowing significantly more cost-effective for domestic lenders.

Other financial institutions have also utilized this RBI facility to raise funds through dollar bonds, demonstrating a broader market trend.

• HDFC Bank
• Axis Bank
• ICICI Bank

The bonds received strong credit ratings, including BBB from S&P, BBB- from Fitch, and BBB+/Stable from CareEdge Global. A consortium of prominent financial institutions served as joint bookrunners for the issue.

• BNP PARIBAS
• Citigroup
• Crédit Agricole CIB
• Emirates NBD Bank PJSC
• HSBC (B&D)
• MUFG
• Standard Chartered Bank

The successful bond issuance by SBI underscores a broader trend of Indian banks leveraging RBI’s policy support to access international capital markets efficiently. This strategy helps optimize funding costs and diversify their investor base.