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Green Finance / Treasury & Capital Markets
State Bank of India prints first green bonds
State Bank of India's US$650 million maiden green bond reaffirms India's strength in the global debt market
Chito Santiago 20 Sep 2018
INDIA'S largest public sector bank, State Bank of India (SBI), on September 19 priced its inaugural green bond offering amounting to US$650 million, which also helped re-establish India’s strength in the international bond market.
The Reg S five-year deal was priced at 99.523% with a coupon of 4.50% to offer a yield of 4.608%. This was equivalent to a spread of 165bp over the US treasuries, or at the tight end of the final price guidance of between 165bp and 170bp. The bonds further tightened in the secondary market and opened at 161bp in the morning of September 20.
“This is an important transaction for India,” says a banker familiar with the deal. This comes as the entire emerging market space has been under significant pressure over the past several weeks, which saw the Indian rupee being one of the worst performing currencies in the world in 2018 and the Indian bonds gapping out by as much as 10bp last week.
In executing the transaction, SBI has been monitoring the market for a window of stability, looking for an opportunity to launch the deal, post that volatility and the trade war nervousness in the market.
It went out in the Asia morning of September 19 with an initial price guidance of 185bp area and was able to build on order book that peaked at US$1.8 billion. On the back of that strong investor demand, it revised the price guidance to between 165bp and 170bp, eventually printing the deal at the tight end.
SBI also managed to upsize the deal to US$650 million as it was initially open to price a US$500 million offering, the banker says.
The SBI transaction followed that of a recent Indian issuer in the market, Power Finance Corporation, whose issuance the banker describes as disappointing from the primary perspective as it managed to price a deal size of only US$300 million. “As a leading Indian issuer, SBI managed to restore confidence in India’s strength in the international bond market,” the banker adds.
The final order book amounted to over US$1.25 billion with 114 accounts participating. In terms of geographical distribution, 52% of the bonds were distributed in Asia, 45% in Europe and the Middle East and 3% in offshore US. By type of investors, banks accounted for 41%, fund managers 30%, insurance companies 17%, private banks 8% and public sector 4%.
The bonds, issued through SBI’s London branch, were drawn from the bank’s US$10 billion medium-term note programme. Proceeds from the issuance will be applied towards investments in eligible green projects. KPMG has issued an independent limited assurance statement on SBI’s green bond framework, and the bonds have been certified as green by the Climate Bonds Initiative.
DBS, First Abu Dhabi Bank, HSBC, MUFG Bank and SBI Capital Markets acted the joint bookrunners for the transaction.
SBI has adopted a green bond framework as it embarks on its sustainability journey with an objective to create a positive impact on the environment. Among the green initiatives rolled out by the bank include the installation of windmills for captive power consumption – a first in Indian banking industry.

The bank also offers concessional interest rates for renewable energy projects and it has a separate incremental exposure limit for the renewable energy sector. 

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