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After the Indian Securities and Exchange Commission changed the valuation rules for AT1 bonds earlier this year, the sale by the largest lender in the country could bring the almost dead market to life, but the rules were later partially relaxed. it was done. The issuance of SBI bonds may encourage other government-owned lenders to open up local markets rather than globalize like their private sector rivals HDFC Bank and Axis Bank.
SBI aims to raise a minimum of Rs 1,000 with the option of holding up to Rs 4,000 in case of oversubscription.
According to market sources, these bonds will be bid on the stock exchange’s electronic debt bidding platform on Wednesday. Semi-equity securities may offer 7.90% to 8.10% on call options for 5 years, which gives investors access to exit routes.
AT1, or perpetual bonds, do not have a fixed maturity.
“Five years later, we have a phone option every year,” said one source. Bonds comply with the international capital standard Basel III.
SBI Capital Markets helps banks raise funds. We have contacted several local investors, including private banks, Treasury, fixed income companies, retirement organizations, wealth managers and insurance companies.
“All institutional investors may be betting on bank sovereign support, but wealth managers can sell them to wealthy yield-hungry clients,” said a senior approached by SBI Cap. The executive said.
The State Bank of India and SBI Capital Markets did not immediately respond to the ET question sent on Sunday night.
AT1 bonds are billed as quasi-stocks with a high risk of capital loss. These are usually rated 3-4 notches lower than the issuer’s corporate credit rating.
Local rating agencies Crisil and India Ratings have rated SBI’s paper AA-plus with a stable outlook.
“The rating also takes into account the ongoing and strong support that banks are likely to receive from their majority owner, the Government of India (GoI), both on an ongoing basis and in case of distress.” Said Crisil in a memo.
Standalone-based SBI is well-capitalized, with Tier I and overall capital adequacy ratios (under Basel III) of 11.44% and 13.74% as of June 30, 2021, respectively. They were 11.32% and 13.66%, respectively. View data for Crisil, March 31, 2021.
Mutual funds were once the main buyers of such AT1 bonds, but have been cold about this asset class last year after banking regulators ordered these products to be amortized at Yesbank’s state-sponsored bailout. is. Also, on March 10, Sebi ordered investment trusts to limit ownership of specially-featured bonds to 10% of the scheme’s assets and evaluate them as 100-year-olds starting next month, creating a wave of redemption. Could cause it. Capital market regulators then relaxed the valuation rules, but some riders joined after the Treasury called for the withdrawal of the directive on investment trusts.
According to data compiled by JM Financial, bank sales of perpetual bonds almost halved from 34,860 rupees three years ago to 18,772 rupees in 2009. Sales of AT1 bonds were sluggish this year.
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