NEW DELHI: After the successful international bond issue of India’s largest lender, State Bank of India (SBI) other banks are planning to raise funds globally. These include names like Bank of India, IDBI Bank and Bank of Baroda.
SBI mopped up $1.25 billion in foreign debt sale through a dual tranche bond programme of 5-year and 10-year, making it the largest ever offering from a domestic issuer. The bank raised $ 750 million in 5-year tenure at US treasury interest rate plus 205 basis points, while it priced the 10-year $ 500 million issue at 225 bps over the treasury.
“The US Fed’s tapering will lead to a bit of interest rate tightening globally. Due to which these people do want to go and tap the global debt capital market before rates tighten. From investors perspective what we are seeing in equities market where Foreign Institutional Investors are coming and pouring in capital in the expectations of stable government coming into power, we are seeing the same kind of confidence in the bond market too,” said Ravi Shankar, MD and India head of boutique investment bank Avista Houlihan Lokey.
Last month the US Fed announced further tapering due to economic recovery. The Federal Reserve trimmed the bond-buying programme for the third time at its meeting chaired by Janet Yellen. Now the bond-buying programme stands at $ 55 billion per month after the further cut of $ 10 billion.
According to issue arrangers due to the fear of rising interest rates in the international market, many companies and banks may in fact fast track their bond issuances.
A senior official with foreign bank which act as arranger said IDBI Bank is discussion with bankers for floating bond issue. The amount and timing is yet to be decided which will depend on pricing and back to back demand for foreign currency resources its (IDBI) clients. An executive working with international banking wing of Bank of Baroda (BOB) said the fund requirement (for bank) is there. Besides catering to foreign exchange requirements of clients, bank also needs funds to buy up India related assets that foreign banks are offloading into market. —Agencies