State Bank of India's successful dollar debt sale prompts Bank of Baroda to test waters, bankers say

Synopsis

Bank of Baroda is actively seeking dollar funding avenues to bolster its operations, inspired by the successful foreign-currency bond issuance led by State Bank of India. The bank is considering a dual-tranche bond sale with maturities of three and five years. Indian banks are keen on dollar borrowings as they become increasingly cost-effective. These funds are intended to meet the financial requirements of the bank's head office and overseas branches.

India's Bank of Baroda is considering dollar funding, a day after its peer State Bank of India, the country's largest lender by assets, received strong demand for its foreign-currency bonds, two merchant bankers said on Thursday.

BOB, India's second largest state-run lender by assets, plans to raise funds through ‌a dual-tranche ⁠bond issue ⁠maturing in three years and five years, and has provided initial guidance.

The bank has ​offered a spread of 120 basis points above U.S. Treasury for the three-year option ​and 130 bps on the five-year sale, the bankers added, requesting anonymity as they are not authorised to speak to media.

BOB did not ​reply to a Reuters email seeking ⁠comment.

"Ideally, they ‌are eyeing $500 million through each maturity, but if the ​cutoffs are ​aggressive, they could choose to upsize one of the ⁠maturities," one of the bankers quoted above said.

Indian banks ​have been making a beeline for dollar issues after ​the Reserve Bank of India's swap facility announced in June made overseas borrowing cheaper.

State Bank of India on Wednesday raised $500 million through a five-year issue at 5.25% coupon payable semi-annually. The issue was sold at a spread of 88 bps over Treasuries, sharply lower from ‌a guidance of 120 bps, with bidding nearly touching $2.5 billion.

Private peers such as HDFC Bank, Axis Bank and ICICI Bank also raised funds through ⁠dollar bonds in June and July.

Bank of Baroda will issue these papers through its branch in International Financial Service Centre Banking unit at GIFT City. ​The proceeds will be used towards funding requirements of the bank's head office as well as foreign branches, along with general corporate purposes.

The bonds will be rated BBB, BBB- and BBB+ by S&P, Fitch Ratings and CareEdge Ratings, in line with the issuer's ratings.

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