SBI to tap Taiwan debt market with $500 million Formosas

Mumbai: State Bank of India (SBI) is set to raise up to $500 million by selling 'Formosa' bonds in Taiwan, a move that will help diversify the international investor base and tap cheaper money before global rate gauges rise further following the US Federal Reserve's liquidity unwinding, three people aware of the development told ET.

The country's largest bank is building on resources as it sees credit demand accelerating this year.

Those bonds are likely to be of a five-year maturity, with a base size of about $250 million. The bank may retain subscriptions up to $500 million depending on investor response. The deal is expected to be launched within a week.


"Taiwanese investors are showing interest in debt securities sold by Indian companies, which can also get a new set of investors," said one of the persons, who did not wish to be identified.

Last week, a group of Taiwan-based insurance companies bet partly on $4 billion Reliance Industries bonds, the largest ever deal from India.

SBI did not reply to queries emailed by ET.

Formosas are foreign-currency bonds, raised in Taiwan and generally listed on the Taipei Exchange. Borrowers are required to have a credit rating of BBB or investment grade at least. The market for Formosas has expanded in recent years as local investors including life insurers are seeking higher yields. The AA-rated country's 10-year benchmark yields about 0.8% versus 6.52% from India, rated BBB-, four notches lower than Taiwan.

Citi India, HSBC, JPMorgan, MUFG and Standard Chartered Bank are said to be among others that are helping the bank to sell Formosa bonds. Individual banks could not be contacted immediately for comments.

The proposed bond sale will be part of the lender's Middle Term Note programme. The proceeds will be primarily used for its offshore credit expansion. "Part of it may also be brought back to the local market depending on the cost of currency cover risks and credit demand. Money is fungible," said another senior executive involved in the matter.

During the September quarter in this financial year, the bank's credit growth was moderate at more than 6% year-on-year, dragged by corporate credit. However, retail growth was healthy at 15% year-on-year, driven by mortgages and express credit.