State Bank of India is planning to launch a marketing campaign for its benchmark bond issue next Monday in Hong Kong, Singapore and New York. Speaking to NDTV Profit, Hemant Contractor, MD & group executive (international banking division), SBI, said that the bank may look at a $1-2 billion issue depending on the market conditions.
“We are starting a road show on Monday to meeting investors. We have not decided on the issue yet; it all depends on the state of the market and the condition on that. So, we have not yet decided on the issue but we will certainly start meeting investors from Monday onwards next week,” he said.
Below is a complete interview. Also watch the accompanying video.
- So, you haven't decided on the size of the issue yet? Are you sort of testing the waters right now?
- Yes, that depends on the state of the market. If we feel that the conditions are favorable, we will be going in for a benchmark size issue.
- When you say benchmark issue, people talk about $1-2 billion. Is that the range?
- Yes, that will be roughly the range.
- Just talk to us a little bit about the timing of this roadshow…
- We had been waiting for a long time because we had plans to tap the market for the last four or five months. But clearly, the conditions were not favorable and now we feel that there is some improvement taking place in the market and that’s why we positioned this road show in such a way that we would able to meet the investor when conditions are more favorable than in the recent past. We do see conditions improving and that’s the reason we have timed the road show for the next week.
- Are currency issues still behind us?
- Overall, some of the concerns relating to India have probably played out to our mind and there is some sign. The outlook on India is probably changing for better and the fact that the oil prices also have come down little bit, it has improved the current account deficit position, which helps ensuring that further depreciation of the rupee doesn't take place. The rupee then improves. The fact is that (there has) not been too many Indian investors approaching the market and clearly, there does seem to be some appetite for the Indian paper building up. So all these factors contributed to our decision to find out whether you know whether we could tap the market now.
- Recently, the RBI increased the FII debt limit in the government bonds and SEBI auctioned the limits for those and the response for that particular auction was fairly tepid. Would you take that as an indicator for demand for something like an SBI dollar bond issue or they are completely separate instruments?
- Not really because as you say, that’s a different class of investments and clearly the investors that we have in our mind are a different set of people, who essentially look at the long term story of the country and of the bank. So, there is a different class of investors; their investment decision would be guided by different set of factors.
- Just a note on the cost of raising funds abroad...Is it significantly more attractive for you to go in for a dollar bond issue from a costing perspective?
- Yes, it’s significant because we use fund assets abroad, so that’s why it is clearly attractive for us. However, if you had to bring those dollars and use it for funding an Indian operation, probably then they would not be that attractive. But we are largely going to use it for funding our overseas assets and that’s what would make things quite attractive for us.
- So there are no implications for any of your capital ratios?
- It will not change the Tier-II ratio; this will be a market borrowing. It will be a 144A issue.
- So would you be able to talk about the capital position right now?
- Well, I won’t be able to talk about that right now because this exercise that we are attempting to do now is not clearly aimed at the bank’s capital. It is more to do with meeting our business funding need. We are tapping the overseas market because we have some visibility of an asset and to fund this asset, we are basically looking at raising this fund. There is no capital angle there.
The road show is planned for the next week for about five days and then we will take a call whether to launch the issue or not.