India's Inclusion To JP Morgan Index Raises Motivation Of Infrastructure Bond Issuers

India’s addition to the JP Morgan’s emerging markets bond Index has provided an additional motivation to the Indian banks that are planning to tap the domestic corporate bond market through infrastructure bonds.

Banks with infrastructure bond issues planned in the near term are now eyeing to raise funds at cheaper prices after the inclusion was announced on September 21.

 “The inclusion news has come as a festival for the bond market. Demand is already good so all top banks are likely to come,” said Venkatakrishnan Srinivasan, Founder and Mangaing Partner, Rockfort Fincap LLP.

Also Read | What Will Be The Impact Of India's Inclusion In JP Morgan Index On The Economy?

SBI

India’s largest lender State Bank of India today raised Rs 10,000 crore through infrastructure bonds maturing in 15 years at a coupon of 7.49 per cent. The issue was fully subscribed.

According to a bid book obtained by Outlook Business, SBI received a total of 134 bids in the range of 7.40 per cent and 7.65 per cent. Demand was mainly seen from mutual funds, insurance companies and banks, a fixed-income debt manager said.

Earlier at the end of July, the state-owned bank had successfully raised Rs 10,000 crore through first-tranche of its 15-year infrastructure bonds at a coupon of 7.54 per cent.

“India’s inclusion to the JP Morgan Index has further increased the appetite of infrastructure bonds, which are already considered premium assets,” a treasury head at a prominent private bank said.

Infrastructure bonds are typically issued by banks to fund infrastructure projects and expand business activities.

Before the inclusion was announced, market was expecting SBI’s issue to be priced between 7.50 per cent and 7.55 per cent.

Also Read: Nifty PSU Bank Jumps 3% After India’s Inclusion To JP Morgan’s Emerging Markets Bond Index

ICICI Bank

Following SBI’s trail, ICICI Bank, India’s second largest bank by business plans to raise up to Rs 4,000 crore through infrastructure bonds maturing in 10 years.

“We are likely to upload it today. The base will be Rs 1,000 crore with greenshoe at Rs, 3,000 crore,” a bank official told Outlook Business.

It was in December 2022, when the private bank had turned to the bond market where it raised Rs 5,000 crore through infrastructure bonds maturing in seven years at a coupon of 7.63 per cent. The issue was fully subscribed.

Bonds of both SBI and ICICI Bank are rated “AAA” by CRISIL Ratings.

According to merchant bankers, Canara Bank and Axis Bank are also in talks to tap the primary market soon.