S&P Global: service sector dragged on growth with marginal output gains

S&P Global: service sector dragged on growth with marginal output gains

State Bank of India (SBI), the country's largest lender by assets, has announced plans to raise funds through the issuance of dollar-denominated bonds with a maturity of five years, according to reports from three merchant bankers. This move comes days after S&P Global Ratings upgraded India's sovereign credit rating for the first time in 18 years in August [1].

SBI is eyeing at least $500 million through the issue, with the possibility of raising up to $1 billion, based on the response from the market. The issuance is expected to be finalized over the next few days. SBI has provided an initial guidance of a spread of 105 basis points over the US Treasury yield, but the actual spread may be lower due to strong demand for the bonds [1].

The notes will be rated 'BBB' by S&P, aligning with the issuer's ratings. This upgrade reflects the positive outlook on India's economic stability and growth prospects. Yields on dollar bonds of SBI, considered a quasi-sovereign issuer, have dropped following the rating upgrade, benefiting the lender for fresh fundraising [1].

The upgrade also opens up more favorable placement opportunities for state-linked entities and a broader category of banks and non-banking finance companies. Maksim Zenkov, deputy head of emerging markets fixed income at financial data aggregator Cbonds, noted that the upward trend in government bond yields serves as an additional stimulus to consider tapping the dollar debt market [1].

In November 2024, SBI had raised $500 million through five-year dollar bonds at a yield of 5.13%, which was at a spread of 82 bps over Treasury yield with similar maturity, the tightest spread achieved by the lender. This recent issuance is expected to benefit from the favorable conditions created by the sovereign rating upgrade [1].

References:
[1] https://www.business-standard.com/companies/news/sbi-to-raise-up-to-1-bn-via-5-yr-dollar-bonds-after-india-s-rating-upgrade-125090200131_1.html