Investors lap up SBI bonds again, issue subscribed three times

MUMBAI: The State Bank of India's retail bond issue has been oversubscribed three times within two days of its opening. The country's largest bank mobilised about 6,000 crore, but a huge portion has been subscribed by non-retail investors such as qualified institutional investors, corporates and high net worth individuals.

SBI chairman OP Bhatt said he expected a total subscription of around 10,000 crore by the time the issue closes on Monday. The SBI bond issue, which opened this Monday, aims to raise 1,000 crore with a greenshoe option of another 1,000 crore. The bank has decided to accept oversubscription from retail investors up to 10,000 crore.

Mr Bhatt, who was speaking at the sidelines of an ICRIER seminar, expressed regrets about the bonds not having a wider reach. "I am aware that a lot of investors have not been able to apply for these bonds and I am very sorry about it. We will make sure we have increased branch coverage for the next issue."

The issue has come under criticism for its lack of reach this time, with only 126 of its branches offering the bond applications, which accounts for less than 1% of its total number of 14,000 branches. Further, since these applications are available only in physical form, access to them has become even more difficult. Investors subscribing to the issue need to have dematerialised accounts.

While launching the bond issue, Mr Bhatt was confident that the bonds would be oversubscribed in the very first hour of the opening. "Our last issue was oversubscribed 19 times mainly because of our brand and attractive pricing," he added.

The issue comes with two options - 10-year bonds with a coupon of 9.75% and 15-year bonds at 9.95%. The 10-year paper has a call option after five years and it would pay only 9.30% for non-retail participants. The 15-year paper has a call option after 10 years and offers 9.45% for non-retail investors.

Mr Bhatt has been very confident of not only the success of the bank's latest bond issue in terms of the amount it raises, but also of deploying the funds.

At the seminar, he dwelt on Indo-Japanese trade prospects, saying he was for foreign banks coming to India as that made Indian banks more competitive. The SBI chairman said the bank would be more than happy to set up mid-corporate branches in Japan to cater to corporates exclusively.

Mr Bhatt denied reports of the bank making demands for a blanket permission for mergers with other subsidiaries to the Parliamentary Standing Committee on Tuesday. He said the report emanated from 'Parliamentary quarters' and he did not have much say in it.