State Bank to issue maiden green bonds
The country’s largest lender, State Bank of India (SBI), has entered the international market to raise dollar funds through its maiden green bonds issuance.
According to sources, the bank was engaged in investor calls throughout Monday and will decide on the issue size and pricing only after getting a commitment.
The bank was looking to raise at least $500 million this time out of a $3-billion plan, they added. SBI officials could not be reached for comments.
Green bonds are regular bonds, the proceeds of which are used to fund sustainable green projects. A certification is needed by the issuer from agencies to show investors. Green bonds generally attract lower coupon than regular bonds. Some international investors are allowed to invest only in green bonds.
The bank plans to raise up to $3 billion in green bonds and is working under a framework set by KPMG and Climate Bonds Initiative, which determines eligibility criteria for green projects and provides the requisite transparency and disclosures for investors.
The managers for the issue include Bank of America Merrill Lynch, BNP PARIBAS, Citigroup, Crédit Agricole CIB, HSBC, SBICAP and Standard Chartered Bank.
SBI has given a commitment to the government to finance viable renewable energy projects worth ~816 billion over a five year period (20152020).
According to the bank’s green bond framework, the proceeds would be used for giving loans for renewable energy, including solar, wind, hydropower and geothermal, and low carbon buildings, industry and energy-intensive commercial, energy efficiency processes, waste and pollution control and sustainable transportation projects such electric vehicles.
Typically, for an emerging markets issuer raising funds from Europe, the percentage of such dedicated green bonds would be at least 40 per cent, whereas, for an Indian issuer, the percentage is lower as green standards are not well defined in the country, according to a source familiar with the issuer.
China is the largest issuer of green bonds.
State Bank of India plans to list the bonds in Singapore and also tap European investors, according to the source. The book-building process is on and pricing and other guidance would be known later.
It is expected that the bank would raise the bonds, expected to be of five-year tenure, at equivalent maturity US Treasury plus 130-150 basis points, which would be at 44.22 per cent. This would still be higher than the dollar bonds raised by the bank at 3.29 per cent in January 2017. The US yields have hardened during this period, but SBI would likely benefit from lesser spread over the treasury.