The Hindu : Business : Centre issues bonds to State Bank of India

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Centre issues bonds to State Bank of India

Special Correspondent

Towards subscription to the rights issue

Rs. 16,376 crore mobilised through the issue
Govt. stake in
the bank is
now 59.7 p.c.

NEW DELHI: The Central Government on Thursday issued bonds worth nearly Rs. 10,000 crore to State Bank of India (SBI) to pick up about 60 per cent of its rights issue, priced at Rs. 1,590 a share.

The 16-year ‘Special Bonds’ are for an exact sum of Rs. 9,996.012 crore and carry a coupon rate of 8.35 per cent. “The special bonds are being issued at par to SBI as subscription towards the rights issue of equity shares of SBI,” an official statement here said.

The statement also made it clear that investment in these special bonds by banks and insurance companies would not be reckoned as an eligible investment in government securities for meeting their Statutory Liquidity Ratio (SLR) requirements. The rights issue of the country’s largest state-owned bank was fully subscribed earlier this month, fetching close to Rs. 16,736 crore. In effect, the Government’s share in it was 59.7 per cent.

Even as SBI had pegged the rights issue at a discount of about 35 per cent to its share price in the stock market earlier this year, the scrip has been on the decline on the bourses in recent times. It closed at Rs. 1,650.45 on the Bombay Stock Exchange (BSE) on Thursday, which works out to a mere 3.7 per cent mark-up over the rights issue price.

PTI reports:

SBI offered to issue one share under the rights issue for every five shares held by the existing shareholders.

Briefing reporters after the Cabinet had approved the SBI’s rights issue last year, Finance Minister P. Chidambaram had said, “We have decided to subscribe to the rights issue. We intend to issue bonds of Rs. 10,000 crore for the purpose.” This will not entail any outgo from the Exchequer this fiscal, he had added. The bank has been exploring various options to mop up funds, but a rights issue would allow the bank to raise capital without diluting the government shareholding.

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