SBI Raises Rs.4,000 Cr via Issue of AT-1 Bonds

SBI AT1 Bonds

by 5paisa Research Team Last Updated: Dec 13, 2022 - 06:18 pm 54.1k Views
Listen icon

State Bank of India announced that it had raised Rs.4,000 crore through the issue of Additional Tier-1 (AT-1) Bonds. These AT-1 bonds are perpetual bonds that do not have any specified maturity. However, the issuer has the prerogative to call back the bonds after a period of 5 years, which is generally the norm. However, the interest will be paid on a periodic basis on these bonds.

One of the big advantages of AT-1 bonds is that they are treated as quasi-equity and, being perpetual in nature, they are at par with equity. Hence, any AT-1 bond raising directly boosts the Tier-1 capital of the bank. The coupon rate on the AT-1 bonds has been fixed at 7.72%, which is one of the most competitive rates in that segment.

The base issue size was Rs.1,000 crore, but SBI received bids for almost Rs.10,000 crore. Finally, SBI has decided to accept bonds worth Rs.4,000 crore at the coupon of 7.72%. AT-1 bonds had come under some sort of cloud last year after Yes Bank repudiated its AT-1 bonds but that is normally not a concern for investors when it comes to blue-chip banks like SBI.

SBI was able to get a competitive coupon rate considering its AAA rating from all the domestic credit rating agencies. However, the AT-1 Bonds are rated AA+ considering the hybrid nature of these bonds and the higher risk implicit in these instruments since they are technically of perpetual maturity.

SBI has a capital adequacy of 13.66% as of June 2021 and needs to continuously boost its capital base in tune with the expansion of its loan book. Being the dominant PSU bank in India, it is expected to be one of the big beneficiaries of the post-pandemic boost to lending. The AT-1 bonds will help SBI to boost its Tier-1 capital in that direction.

                   -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -

Also Read:

1.  Different Types of Debentures and Their Use

2.  Difference Between Convertible and Non-Convertible Debentures

3.  What are Pros and Cons of Investing in NBFC NCDs

How do you rate this blog?

Start Investing in 5 mins*

Rs. 20 Flat Per Order | 0% Brokerage

oda_gif_reasons_colorful

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Open Free Demat Account
Resend OTP
Please Enter OTP
Mobile No. belongs to

By proceeding, you agree to the T&C.

Latest Blogs
Best Metal Stocks in India 2024

The resilience of Indian metal sector can be gauged from the fact that Nifty Metal index has grown in double digits in past two years. The index grew 22% in 2022 and nearly 20% last year. This performance came despite threats of cheaper imports from China and benign commodity prices. 

Market Outlook for 06 March 2024

Nifty started Tuesday’s day marginally negative on back of negative cues from the global markets. However, amidst stock specific momentum on both sides, the index recovered from the intraday low of 22270 and ended the day above 22350 with a marginal loss.

Stock of the Day – Bank of India

Bank of India Stock movement of Day