State bank of India Tranche I issue Issue Open on 21st February 2011 Closes on 28th February 2011
Salient features of the Tranche I issue
1. Superior rated issue - “CARE AAA” by CARE and “AAA/ STABLE” by CRISIL
2. The bonds are Not Secured and have No Lock-in period.
3. Attractive Coupon rates for retail investors - 9.75 % (10 year bond) & 9.95 % (15 year
4. Interest on any refund of subscription amount will be paid @ 7%p.a. on the amount
refunded to allottees and @ 4% p.a. on the amount refunded to non-allottees.
5. Bonds to be issued in dematerialized form and will be listed on the BSE and NSE for
early liquidity; therefore NO TDS shall be deducted.
6. Allotment on “First Come First Serve Basis”.
7. Minimum Application – Rs.10, 000 and in multiples of Rs.10, 000 thereafter.
8. Maximum Application – Rs.5, 00,000.
State Bank of India will sell bonds to retail investors offering returns of 9.75% and 9.95% on 10- and 15-year bonds, respectively.
In a letter to the Bombay Stock Exchange, the bank said its central board has approved raising funds through the issue of subordinated debt (lower tier II bonds). It has approved selling bonds worth Rs 1,000 crore, with an option to retain oversubscription of up to Rs 1,000 crore. In case of retail demand, SBI can retain the oversubscription beyond Rs 2,000 crore up to Rs 10,000 crore.
This time around the bank is offering different rates for retail and non-retail investors. Non-retail investors, who include institutions and high net-worth individuals who invest in bulk, will receive 9.3% for 10 years and 9.45% for 15-year investments. The bank also has an option to pre-pay investors in the 10-year bonds after 5 years and after 10 years for 15-year bondholders.
Senior officials of the bank said that details regarding the opening of the issue would be announced on Tuesday. Although these investments are long-term in nature, investors are assured liquidity through the listing of these bonds.
Investment bankers who are distributing the issue say earlier experience suggests that SBI is bound to receive a huge oversubscription on the first day itself. There are many banks that are offering 9.5% and above on fixed deposits. But these investments typically are for one-two years and interest rates are widely expected to come down in the long-term, said an investment banker.
SBIs earlier retail bond issue, which offered a much lower return, was a huge success with the bonds being sold out on the first day. Successful investors got an opportunity to make equity-like gains as the bonds were listed at a 5% premium on listing. While the returns on the bonds are even better, the listing position would depend on the extent of unsatisfied demand in the public issue. Prices of SBIs earlier bonds fell marginally on Monday, but the securities continue to trade at a significant premium over the issue price.
Although the size of the issue is minuscule compared to the banks balance sheet, the issue is part of an ongoing programme to develop a market for long-term resources. The bank presently funds all its long-term loans, which include home loans and loans to the infrastructure sector, through core savings deposits and medium-term deposits. The long-term bonds will enable the bank to match some of its long-term fixed liabilities.
For Additional detail check the below mentioned table
Tranche 1 Issue Opens Monday, February 21, 2011
Tranche 1 Issue Closes Monday, February 28, 2011
Rating AAA” by CARE and “AAA/ STABLE” by CRISIL
Issuer State Bank of India
Listing NSE and BSE
Applicability No TDS, Being Bonds held in Demat form
Market Lot/ Trading Lot One Bond
Security Unsecured and No Lock in period
Series Series 3 Lower Tier II bond Series 4 Lower Tier II bond
Frequency of Interest payment Annual Annual
Face Value per Bond Rs. 10,000/- Rs. 10,000/-
Coupon (%) p.a Retail: 9.75 % Retail: 9.95%
Tenure 10 years 15 years
Call option 5 years and one day 10 years and one day