State Bank of India (SBI), the country's largest government-owned organization by market capitalization, schedules to garner up to $2 billion in FY24 through overseas bond sales, probably dwarfing last year's foreign fund raises by three of its closest private-sector rivals including HDFC Bank. Mumbai-based SBI's board will meet on April 18 to consider the fund-raising through sales of senior unsecured notes. SBI is expected to issue these bonds to overseas investors in multiple tranches.

The instruments may be denominated in any currency, including the dollar, even as debates intensify globally over the future interest-rate trajectory in the US and the likely course of the world's reserve currency through a year of modest global growth at best. SBI, which accounts for nearly a fifth of all outstanding bank loans in the country, told stock exchanges late that it will examine the situation and determine the method of long-term fundraising, which could be either through a public offer or private placement of senior unsecured notes in US dollars or other convertible foreign currencies, under Reg-S/144A.

The Reg-S/144A allows non-US companies to issue securities to investors in both the US and other markets without having to register with the Securities and Exchange Commission (SEC). Debt-market analysts said that overseas bond issuances by the biggest private-sector lenders, such as HDFC bank, ICICI Bank and Axis bank, were typically in the region of $1 billion or below for a given financial year. In FY23, for instance, such bond issuances didn't exceed a billion dollars for any private sector lender, they said.

US dollar bond sales

In February, SBI had raised one of the largest syndicated social loans in the Asia-Pacific, garnering about $1 billion. That sale included $500 million in primary issuance and an additional $500 million through a greenshoe option. This was the first time that SBI raised a social loan, for onward lending to green solutions, with the loan book being closed on February 24.

To be sure, US dollar bond sales are beginning to resume after a surge in the US Treasury benchmark had caused issuances to dry up globally.

Late last month, the power ministry-owned REC raised $750 million at a rate of 5.659%, or T+212.5 basis points, indicating that SBI may be able to obtain better pricing despite the increase in rates overseas as SBI also has quasi-sovereign status. One basis point is 0.01 percentage point.

The US 2-year Treasury bond yield is currently approximately 4%, while the 10-year yield is at 3.426%. Despite the uncertainty in the global bond market, SBI is likely to take advantage of investors' interest for bonds of strong state-run companies that are considered quasi-sovereign from the investment perspective.