State Bank of India on Wednesday raised Rs 4,000 crore via Basel-III compliant Additional Tier -1 (AT-1) bonds, at a coupon price of 7.72%. This is the initial AT-1 Bond issuance in the domestic industry post the new regulations of the Securities and Exchange Board of India (Sebi).
“This is the lowest pricing ever offered on such debt, issued by any Indian bank since the implementation of Basel III capital rules in 2013,” a state-owned lender mentioned in a release.
The concern by the state-owned lender got bids worth Rs 10,000 crore, as against Rs 1,000 crore as base concern size and Rs 3,000 crore as retain more than-subscription choice. This indicated that demand for the bank’s bonds was much better than anticipated by the industry. The bonds have a spend-in date on September 3.
AT-1 bonds are sort of unsecured, perpetual bonds issued by banks to shore up their core capital base to meet the Basel-III norms. The AT1 bond issued by the state-owned lender has a contact choice on September 3, 2026, or any anniversary date thereafter, topic to tax contact or regulatory contact. The initial coupon payment shall be made on September 3, 2022, and every single year thereafter, till the redemption.
In a press release, the bank mentioned it had a AAA credit rating from neighborhood credit agencies and the AT-1 providing was rated AA+, which occurred to be the highest rating for these instruments in view of their hybrid and higher-threat nature.
Before this bond concern, Axis Bank and HDFC Bank had tapped the overseas debt industry to raise funds via AT-1 bonds. Recently, HDFC Bank raised about $1 billion from overseas markets.
Earlier this year, Sebi had amended the valuation rule of perpetual bonds. The deemed residual maturity of Basel-III AT-1 bonds would be 10-year till March 31, 2022. The industry regulator also mentioned from April to September 2022, it would be valid at 20 years and from October 2022 to March 2023, it would have a life span of 30 years. From April 2023, the residual maturity will be one hundred-year from the date of issuance of the bond.