Mumbai: The Rs 2,000 crore retail bond issue by country’s largest lender, State Bank of India (SBI), which opened on Monday, has got a tremendous response, with investors flocking the bank outlets to invest in the securities, analysts said.
“The response is very strong. I would say hefty. I expect at least half of the issue to get subscribed today itself,” Rajesh Tanna, assistant vice president, Bonanza Portfolio Ltd, said. SBI wants to shore up its Tier II or debt capital by way of the issue besides to offer one more investment avenue for the common man.
A few analysts, however, said the issue is likely to get oversubscribed by today itself as it is quite attractive for investors. “The ideal spread between the government bond and the same maturity corporate bond should be 75 basis point. Given that the 10-year G-Sec is now at 8.2%, a spread of 150 bps on SBI bonds makes huge sense for the investor,” an analyst with another leading brokerage said. SBI officials were not immediately available for comments.
The bonds are being offered in two series-- Series 3 and Series 4 and offers an interest of 9.5 to 9.95% to investors.
Series 3 bonds have a tenor of 10 years with a call option by SBI after five years and a coupon rate of 9.75% per annum for retail and 9.30% for non-retail applicants.
Series 4 bonds have a tenor of 15 years and a coupon rate of 9.95% for retail and 9.45% for non-retail investors.
SBI is distributing the bonds through 126 branches spanning 79 centres and will be open to only those with demat accounts. The issue, which opened on Monday, will close on 28 February.
The bond issue is of Rs 1,000 crore with the option to increase the issue size by a similar quantum if the market condition demands it.
AAA rating from Crisil and Care and will be listed on both the BSE and NSE that would offer liquidity to the investors.
In October, when SBI came with its maiden Rs 1,000-issue had snapped up 19 times last October. It had offered 9.25% on a 10-year bond and 9.5% on a 15-year instrument.