The “call option” at the end of 10-years seems to have turned investors circumspect about investing in State Bank of India’s Tier-I bonds issuance (under Basel III).
India’s largest bank managed to mop up ₹3,101 crore via bonds at a coupon rate of 8.10 per cent against the issue size of ₹10,000 crore (base issue size: ₹3,000 crore + green shoe option: Rs 7,000 crore), according to bond dealers. The issue closed today.
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“The call option on this Tier-I bond issuance was available only at the end of 10-years. Investors are still not certain whether the yields are right at this point of time. Many of the Bank’s earlier issuances had call option at the end of five years,” a bond market dealer said.
A callable bond is one whereby the issuer can “call” the bond from the investor before maturity.
Dealers observed that if SBI had attempted to raise more money (beyond the base issue size), it would have had to pay closer to 8.25 per cent.
The Bank received 94 bids aggregating ₹5,920 crore. Out of this, it accepted 64 bids aggregating ₹3,101 crore, per dealers.
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