SBI Taps Dollar Bond Market With Five-Year Issue

State Bank of India is preparing to raise at least $500 million through a five-year dollar bond issue, with the final amount depending on investor demand. The lender has started marketing the bonds after postponing a planned $1 billion issue in June.

State Bank of India (SBI) is preparing to raise funds through a five-year dollar bond issue, with the country's largest lender expected to raise at least $500 million from the public offering. The final size of the issue will depend on investor demand, according to two merchant bankers involved in the transaction.

SBI has begun marketing the bonds and is expected to complete the issuance before the end of the week. The initial price guidance has been set at 120 basis points over US Treasury yields, providing investors with an indication of the premium being offered over comparable US government securities.

The proposed dollar bond issue will allow SBI to access international debt markets and diversify its funding sources. Such overseas borrowings can provide Indian banks with access to a broader pool of institutional investors and foreign-currency funding.

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The lender had earlier planned to raise $1 billion through a dollar bond sale in June. However, SBI deferred the issuance after borrowing costs increased amid heavy supply from Indian banks entering international debt markets.

The latest move comes as Indian lenders continue to assess overseas funding opportunities amid changing global borrowing conditions. Dollar-denominated bonds can help banks meet funding requirements while providing international investors with exposure to India's financial sector.

The final amount SBI raises will depend on demand from global investors during the offering. Strong demand could allow the lender to increase the issue size, while market conditions and investor pricing expectations will also influence the final terms.

SBI is one of India's largest financial institutions and regularly accesses domestic and international capital markets to support its funding requirements. The bank has previously raised funds through foreign-currency bonds and other international debt instruments.

The planned issue is also coinciding with high debt market activity of Indian financial institutions in the foreign markets. International investors have been increasingly being pursued by banks for diversifying their liabilities and securing competitive funds.

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The pricing of SBI's offering is likely to be affected by market conditions, such as the interest rate in the United States and demand for emerging-market bonds and offer from other Indian bond issuers.

The decision by the lender to return to the dollar debt market, where it had delayed its initial transaction, suggests that it thinks it can get foreign-currency loans at a better price. If as planned, the transaction is finalised it would further SBI's international funding scheme and enhance its ability to access debt investors around the world.