SBI bond issue oversubscribed 17 times, closes Today

State Bank of India’s (SBI) Rs. 1,000- crore maiden public issue of bonds received 17 times oversubscription on Monday, the first day of the sale of bonds. The issue is likely to be closed on Wednesday evening instead of on October 25, as was planned earlier.

“ The issue has got overwhelming response from the investors, particularly institutional investors.The issue may be closed on Wednesday. We are not allowed to talk about the same before a public notice appears on the closure of the issue in advance,” confirmed an SBI official, who wished not to be quoted.

SBI is issuing lower Tier- II bonds worth Rs. 1,000 crore with maturities of 10- and 15- years, including a Rs. 500- crore greenshoe option. The retail portion was subscribed twice, while institutional buyers and high networth individuals (HNIs) applied for 46 times and 18 times the portion earmarked for them, the sources said.

The largest bank in the country earmarked 50 per cent of its public bond issue for retail investors, 25 per cent for HNIs and another 25 per cent for qualified institutional buyers (QIBs).

“ The response has been very good for these ‘AAA’ (triple A credit rating denotes highest safety) rated bonds, because the issue offers 9.25 per cent interest on 10- year bonds and 9.5 per cent on 15- year bonds,” said Sharad Rathi, head- investment banking, Almondz Global Securities.

None of the banks in the country are offering higher deposit rates. However, the issue of bonds is in the form of ‘ capital instruments’ and not deposits. The ‘ AAA’ rated bonds are quoting at 8.25 per cent and 8.55 per cent for the same maturities in the bond market. “ As such they will command higher price on listing,” Rathi added. The bonds would be listed on the National Stock Exchange (NSE) for trading.

However, brokers denied there were any restrictions from the market regulator on subscription of the issue by brokerages acting as intermediaries for the clients.