Rs 2,000-cr SBI bond issue to hit markets next Monday

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Mumbai, Feb 15 (PTI) Even as its Rs 20,000-crore rightsissue has hit the North Block stonewall, the nation''s largestlender State Bank today said it will raise Rs 2,000 crore fromthe market through a retail bond issue that will hit open fromnext Monday.

The issue is of Rs 1,000 crore with an option to increaseit by a similar amount if the market demands it, and is partthe bank''s planned Rs 10,000-crore retail bond programme inFY11 through FY12, to shore up its Tier 2 capital.

A senior bank official, who wished to be unidentified,told PTI here today that the bank will hit the market with aRs 2,000-crore bond issue from February 21.

"These bonds will be of two maturities - 10 and 15 years.

While the 10-year bonds will offer a coupon of 9.75 per centto the retail investor, the 15-year bond will fetch 9.95 percent to him. The bonds, that will be opened on February 21 andclosed on 28, will be listed on both the BSE and NSE," theofficial added.

The state-run bank has been awaiting the FinanceMinistry''s nod to launch an ambitious Rs 20,000-crore rightsissue since the beginning of this fiscal. Though the bankingsecretary gave his nod last month, a formal notification isawaited and considering the time needed for Sebi''s permission,it''s certain that the bank will not be able to raise the moneythis fiscal.

The bank official further said the bonds will fetch 9.3percent and 9.45 percent to the non-retail investors for 10and 15 years respectively. The 10-year bonds will carry a calloption in the fifth year, while the 15-year issue will havethe call option in the tenth year. .

SBI''s Rs 1,000-crore maiden bond issue was snapped up by the market in October 2010. The issue was oversubscribed by 17times on the opening day itself, forcing the bank to curtailsubscription as investors were lured by high returns andfinally the issue was overbought 20 times. The bank had thenoffered 9.25 per cent on a 10-year bond and 9.5 percent on a15-year instrument.

Considering this, the current higher offering onlyreflects the market reality in the light of the hardeninginterest rate scenario. SBI has itself hiked deposit rates acouple of times and is offering 9.25 percent for deposits for555 days and 1,000 days.

Late last month, chairman Omprakash Bhatt had said thatthese bonds will be issued in two variants, Series 1 andSeries 2 having maturity of 10 and 15 years respectively, witha face value of Rs 10,000 each. The bonds offer an interest of9.25 per cent for 10 years and 9.5 per cent for 15 years.

These bonds are not deposits of the bank and are notguaranteed or insured and they may not be used as collateralfor any loan made by the bank or any of its subsidiaries oraffiliates. Bonds are different from fixed deposits and arenot covered by deposit insurance, he added.

Since last July, SBI has also hit the overseas marketsthrice with bonds, the latest being the first issue in Swissfrancs (325 million or Rs 1,500 crore) early this week; a 750million euro issue in October and a USD 1 billion issue inJuly.

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