Last week, the State Bank of India (SBI) became the first major Indian corporate entity to raise money from the global bond markets after Standard & Poor’s upgraded our foreign currency debt rating to investment grade. The $700 million SBI issue was being closely watched by other potential Indian issuers to see how it fared.
The initial reports coming in over the weekend suggest that the sovereign credit upgrade has helped SBI borrow at cheaper rates than before. It has got a better pricing than ICICI Bank, which had raised $2 billion in January.
SBI has eventually raised money for a five-year period at a mere 38 basis points over the benchmark London interbank offered rate (Libor). The lower spread indicates that foreign investors see less risk in lending to India than they did before.
This is significant in the light of some recent concerns that the Indian economy resembles a bubble. The success of the SBI issue suggests that the bond markets are not too worried—at least for now.