State Bank of India $SBIN.NS, the largest lender in the country, plans to raise approximately 50 billion rupees ($573.38 million) through the issuance of additional perpetual bonds of the Tier 1 category, meeting Basel III standards. This issuance is expected to be completed by the end of February, according to information from three informed sources.
These sources also disclosed that there is an option for early redemption at the end of the five- or ten-year period after issuance. It is important to note that the sources chose to remain anonymous due to a lack of official authorization to speak to the media.
This issuance will be the first of its kind in the market for over three months. Interestingly, SBI was the last issuer of such bonds in October, releasing them at the same value of 50 billion rupees with a coupon rate of 7.98%. These bonds also offered the possibility of early redemption at the end of a ten-year term.
1. Strengthening Capital Base. The issuance of Tier 1 perpetual bonds will assist SBI in solidifying its capital structure and enhancing resilience to financial risks according to Basel III requirements.
2. Long-term Investment. Investors in these bonds can expect stable coupon income over an extended period.
3. Flexibility for Holders. The option for early redemption makes these bonds more appealing and flexible for various types of investors.
Given the current market conditions and the significance of this issuance for SBI's financial stability, expectations are high for the upcoming offering. Investors view these bonds as a reliable instrument for long-term investment, considering the stable standing of the State Bank of India.
The State Bank of India's initiative to issue additional perpetual bonds represents a significant move towards enhancing financial stability and modernizing its capital base in line with international Basel III standards.
SBI's move to raise funds with perpetual bonds is a strategic step to strengthen its capital base.
