State Bank of India (London) US$1.25 billion 4.125% bonds due 2017
Bookrunners: Bank of America-Merrill Lynch, Barclays, Citi, Deutsche Bank, J.P. Morgan, UBS
Traditionally India is regarded as being somewhat insulated from global market volatility due to its local investor bid. But the nation had a lacklustre 2012, courtesy of economic fears about political malaise, corruption and a growing budget deficit.
The difficulties led to a dearth in equity market activity, with relatively few impressive deals getting done. The bond markets didn’t boast many international transactions of consequence, and those that were done were by and large financial institutions.
State Bank of India (SBI) was the initiator of much of this issuance.
The largely publicly-owned bank opted to conduct a US$1.25 billion bond issue in late July, despite sizeable volatility in the international bond markets. Its bookrunners reasoned that there had been a lack of Indian paper to that point (only Reliance Industries with a US$1.5 billion deal in January and Axis Bank in February had conducted international bonds earlier in 2012) and that investors would welcome the diversity opportunity.
This prediction proved to be prescient. SBI’s bond issue, which was its first in two years, gained extremely strong demand. International investors found the combination of bonds with a five-year tenor from an emerging market but state-linked bank proving to be highly palatable. They ended up offering US$6.8 billion in orders; a level of demand that ensured SBI only had to offer a small new issue premium for the deal.
The strength in demand reassured other Indian banks too, and SBI’s transaction was soon followed by Axis Bank again for a US$250 million tap of its five-year deal, and then IOB and Union Bank of India with their own five-year bonds during August.
For helping to reinvigorate a pipeline of bank bond issuance from India, SBI’s tightly-priced deal deserves recognition.