SBI may raise up to $1b in medium-term notes

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State Bank of India (SBI) may raise up to $1 billion in medium-term notes (MTN) in the first quarter of the next financial year.

The funds will be used to fuel growth in international operations, meet foreign currency needs of Indian companies and repay funds that the bank previously raised. The bank has room to raise about $4 billion under the MTN programme, which has a $10 billion limit.

“We usually raise a benchmark size. We may raise about $750 billion, which can go up to $1 billion depending on the cost and requirement,” said Hemant Contractor, managing director in charge of international operations at the country’s largest lender. Last year, the bank did an issue of $1 billion.

Companies use MTN debt programmes to have constant cash flow through debt issuances. It allows a firm to tailor debt issuance to meet financing needs.

Notes range in maturity from one to 10 years. All else being equal, the coupon rate on medium-term notes will be higher than those achieved on short-term notes. Medium-term notes allow a company to register with the Securities Exchange Commission (SEC) of the US only once, instead of registering it every time the maturities differ.

In 2011, SBI had expanded its MTN programme from $1.2 billion to $10 billion, seeing an opportunity to lend to Indian firms that were expanding aggressively in offshore markets. The bank raises about $1 billion from bond issuances and from bilateral deals every financial year.

SBI is also looking to raise $390 million from the offshore markets through a bilateral deal. But a final call will be taken only after taking into consideration the cost of funds.

The international business of the bank is showing encouraging growth, with 28.76 per cent rise in international advances to Rs 2,17,695 crore at the end of the December quarter compared with 9.75 per cent growth in total advances at Rs 11,83,723 crore.

Non-performing assets in SBI’s international book stood at Rs 3,895 crore, of which Rs 429 crore was translation effect on converting dollars to rupee.

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