SBI raises $650 million via green bond issue

MUMBAI: India’s biggest bank Wednesday opened dollar-bond sales to raise funds for clean environment projects, offering hope to domestic companies that have held back overseas debtfinancing because of the extreme volatility in global currency markets.

State Bank of India raised $650 million via green bonds, proceeds of which will be used to fund environment-friendly projects, two people familiar with the matter told ET. It received a total subscription of about $1.6 billion.

The bank is said to have received subscriptions three-times higher than the actual size. Bonds are of five-year maturity. Those were initially supposed to be priced after adding 185 basis points over the US Treasury bill, now at 2.94 per cent. The bank sold the bonds from its London branch.


Fitch rated the papers BBB-(EXP) grade, the lowest rank in the investment category. SBI is said to have received total subscriptions for about $1.8 billion.

“Finally, the spread over the fiveyear treasury has contracted to about 165 basis points, benefiting the issuer,” said one of the persons cited above.

The SBI bond sale could guide Indian companies to global debt markets, which companies have stayed away from because of the currencymarket turmoil.

When the rupee is losing value against the dollar, companies find it difficult to borrow from the overseas market as the company’s repayment liabilities go up amid an increasing hedging cost. Companies book forwards contract to cover the currency fluctuation risk.

“The outstanding reception to this deal demonstrates both the resilience of the India story among international investors and the high regard they have for the credit story of SBI,” said Hitendra Dave, head of global banking and markets at HSBC India. HSBC was one of the four arrangers of the issue. Among the others was MUFJ.