State Bank of India (SBI), the country's largest lender, on Wednesday said it has sold Rs 4,000 crore of the Basel compliant Additional Tier 1 (AT1) bonds at annual interest rate (coupon) of 7.74 per cent. This is the lowest pricing ever offered on such debt, issued by any bank since the country started implementing the stringent Basel III capital rules in 2013, SBI said in a press release.
"As the aggregate bids were in excess of Rs 6,000 crore, the bank exercised the full greenshoe option of Rs 3,000 crore over and above the base issue size of Rs 1,000 crore," the public sector lender said.
While SBI has AAA credit rating from local credit agencies, its AT1 offering is rated AA+, which is the highest rating in the country for these instruments in view of the hybrid and high-risk nature of these instruments. The AT 1 instrument is perpetual in nature which means it can be called back by the lender after five years or any anniversary date thereafter.
Commenting on the development, Swaminathan J, Deputy MD-Finance, said, "The overwhelming success of this issuance reaffirms State Bank's paper as Gold standard and showcases the investor interest for such quality papers. The apprehensions that prevailed in the market post Yes Bank AT 1 write down in March 2020 have been firmly put behind. The interest payout on such bonds is better than the cost of equity for the banks and it provides a good risk-adjusted return to the investors, hence offers a win-win situation for both the Banks and the investors."
This issuance comes after a successful issue of Tier 2 bonds worth Rs 8,931 crore last month by SBI, which is again the best ever pricing for Tier 2 debt instruments. Both the issuances were managed by SBI Capital Markets Ltd.
Meanwhile, SBI share price closed Wednesday's trade at Rs 194.90, down 4.46 per cent, on the Bombay Stock Exchange.
By Chitranjan Kumar