PSU Stock Alert: SBI's Infra Bonds Issue Oversubscribed By 4 Times; Largest PSU Bank Gets Rs 10,000 Crore

India's largest PSU lender, State Bank of India (SBI) is buzzing on June 27 after the bank's infrastructure bonds issuance received massive demand from investors. SBI's senior unsecured long-term bond issuance oversubscribed by around 4 times. The lender raised about Rs 10,000 crore. SBI share price is currently trading volatile.

At the time of writing, SBI stock traded marginally down to Rs 842.70 apiece on BSE, with a market cap of Rs 7,52,701.77 crore. The stock ranged between Rs 845.20 apiece to Rs 838.90 in the early trade.

YTD, the stock is up by 12% on BSE. The stock's 52-week high and low are at Rs 912.10 apiece and Rs 543.15 apiece respectively.

As per the regulatory filing, the issuance witnessed wider participation with total number of bids to the tune of 143. The investors were from diverse category and across provident funds, pension funds, insurance companies, mutual funds, corporates

etc.

After the closing of bids, SBI decided to accept Rs. 10,000 crores at a coupon rate of 7.36% payable annually for a tenor of 15 years. This represents a spread of 21 bps over the corresponding FBIL G-Sec par curve. The instrument is rated AAA with stable outlook.

SBI plans to utilize the proceeds of the bonds for across provident funds, pension funds, insurance companies, mutual funds, corporates etc.

SBI said, this issuance is also very significant as the Bank has been successful in raising long duration bonds successively.

The lender's chairman Dinesh Khara said that this issuance will help in developing a long-term bond curve and encourage other
banks to issue bonds of longer tenor.

With the current issuance, the total outstanding Long-Term Bonds issued by the Bank is at Rs. 49,718 crore.

As per the latest report of Motilal Oswal, SBI has delivered a strong all-round performance for the past few years and has achieved new milestones in profitability (PAT surpassed INR600b in FY24). The bank has demonstrated considerable improvementsin underwriting standards, while the consistent strengthening of its balance sheet has brought NPAs to pristine levels.

During FY22-24, SBIN has delivered a ~16% CAGR in loans, outperforming many large
peers. Interestingly, the current size of SBIN's balance sheet at INR62t is more than the GDP of almost 174 countries in the world, data from Motilal said.

The brokerage added, "We reckon that this gap is only going to widen as SBIN delivers steady growth going ahead. SBIN has demonstrated high agility and superior execution even at this huge size and is well poised to maintain this momentum."

On the valuation, ,Motilal's note said, SBIN remains well positioned to deliver sustainable growth with high profitability,
led by healthy loan growth, controlled opex and provisions. The management has
guided for broadly stable margins going forward as the bank has levers in place (CD ratio, MCLR re-pricing) to mitigate the impact of the elevated cost of deposits."

Further, the brokerage added, "s well positioned to sustain its growth trajectory, supported by a low CD ratio, strong underwriting and continued momentum in YONO. The asset quality performance remains strong with consistent improvements in headline asset quality
ratios. SBIN is one of our preferred ideas in the sector."

Hence, Motilal estimate a 15% CAGR in
net profit over FY24-26E, with FY26E RoA/RoE of ~1.1%/18.5%. Reiterate BUY with a revised TP of INR1,015."

State Bank of India (SBI) a Fortune 500 company, is an Indian Multinational, Public Sector Banking and Financial services statutory body headquartered in Mumbai. SBI is the largest banking and financial services organization in India, with an asset base of over Rs. 61 trillion.