MUMBAI: The State Bank of India is likely to hit the market with a Rs 2000-crore retail bond issue in February. Although the bank is yet to finalize the pricing of the bonds, merchant bankers are speculating of a yield in the region of 9.5-10%.
SBI's previous Rs 1000-crore bond issue in October 2010 was oversubscribed 20 times because of the attractive yields the bank had offered on its bonds. The bank had offered investors the choice of 9.25% on a 10-year bond and 9.5% on a 15-year bond. There was also a step up option whereby the bank would pay half a percentage point more if it did not exercise its call option at the end of 10 years.
The main attraction of the bond, besides its pricing, is the liquidity. Since the securities are listed in the stock exchange they can be immediately traded after allotment. With the bond price jumping up 5% on listing, some investors managed to sell their bonds for a decent profit. Despite the increase in interest rates since the issue, the earlier bonds continue to trade at a premium. The 10-year bond with a face value of Rs 10,000 is currently traded at Rs 10,265 while the 15-year bond is trading at Rs 10,495.
Senior officials at SBI said that neither the pricing nor the tenure of the bonds has been finalized and the board would approve the final issue. At the time of the October issue, fixed deposits yielded less than 9%. Since then there have been two rounds of deposit rate hikes by banks.
The first round took place around end-December while the second round is currently taking place following the 25 basis point rate hike by Reserve Bank of India on January 25.
TOI
SBI's previous Rs 1000-crore bond issue in October 2010 was oversubscribed 20 times because of the attractive yields the bank had offered on its bonds. The bank had offered investors the choice of 9.25% on a 10-year bond and 9.5% on a 15-year bond. There was also a step up option whereby the bank would pay half a percentage point more if it did not exercise its call option at the end of 10 years.
The main attraction of the bond, besides its pricing, is the liquidity. Since the securities are listed in the stock exchange they can be immediately traded after allotment. With the bond price jumping up 5% on listing, some investors managed to sell their bonds for a decent profit. Despite the increase in interest rates since the issue, the earlier bonds continue to trade at a premium. The 10-year bond with a face value of Rs 10,000 is currently traded at Rs 10,265 while the 15-year bond is trading at Rs 10,495.
Senior officials at SBI said that neither the pricing nor the tenure of the bonds has been finalized and the board would approve the final issue. At the time of the October issue, fixed deposits yielded less than 9%. Since then there have been two rounds of deposit rate hikes by banks.
The first round took place around end-December while the second round is currently taking place following the 25 basis point rate hike by Reserve Bank of India on January 25.
TOI
No comments:
Post a Comment