State-owned Bank of Baroda has successfully concluded the issuance of $700 million through twin three-year and five-year dollar bonds to foreign investors, marking its first overseas bond issue in over seven years. According to CNBC TV18, the bank accepted bids worth $400 million for three-year bonds and $300 million for five-year papers, achieving narrower spreads than initially indicated. The bank raised $400 million through the three-year bond priced at 5.114% per annum coupon rate, while another $300 million was raised by selling five-year securities at 5.318% per annum coupon rate, both payable semi-annually. This historic issuance comes under Regulation S and is set for issuance on August 20, 2026. The bank had offered a spread of 120 basis points above U.S. Treasury for the three-year option and 130 basis points on the five-year sale, with actual pricing achieving tighter spreads than initially guided.
As reported by CNBC TV18, Bank of Baroda accepted bids at a spread of 90 basis points for three-year bonds and 100 basis points for five-year papers, achieving narrower spreads than initially indicated. The bank's actual pricing achieved tighter spreads than initially guided, with the three-year bonds priced at 5.114% per annum and five-year securities at 5.318% per annum. The issuance comprises $400 million of notes with a three-year maturity and $300 million of notes with a five-year maturity, with both coupons payable semi-annually. The bank plans to raise funds through a dual-tranche bond issue maturing in three years and five years, with initial guidance provided. According to merchant bankers, the bank was ideally eyeing $500 million through each maturity, though if cutoffs were aggressive, they could choose to upsize one of the maturities. The latest developments show that SBI on Wednesday raised $500 million through a five-year issue at 5.25% coupon payable semi-annually, with the issue sold at a spread of 88 bps over Treasuries, with bidding nearly touching $2.5 billion.
According to CNBC TV18, this fundraise comes in the backdrop of large banks offering leverage to Non-Resident Indians (NRIs) to place fresh Foreign Currency Non-Resident-Bank (FCNR-B) deposits of 3-5 years duration with them under the RBI'S limited period concessional swap facility. 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. Market intelligence firm CreditSights sees the fair value of Bank of Baroda's notes at around 5 bps below SBI's paper as both banks are underpinned by central government support and have similar credit metrics. The latest reports indicate that Indian banks are raising significant dollar funds offshore to boost foreign currency deposits, with global banks actively arranging these dollar bond and loan deals for Indian lenders. This fundraising effort aims to attract capital from non-resident Indians worldwide. The Reserve Bank of India's measures are fueling this increased demand for dollar debt, with Indian banks potentially raising nearly $43 billion through offshore loans by 2026.
As reported by CNBC TV18, these bonds will be issued through Bank of Baroda's IFSC Banking Unit branch and will be listed on Singapore Stock Exchange, India INX and NSE -IX Exchange 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. Just like its other banking peers, Bank of Baroda has raised these funds to take advantage of the special swap window announced by RBI. Banks are likely to use these funds to provide loans to their wealthy overseas clients who in turn will use them to make deposits under the special FCNR (B) scheme in which RBI fully funds the hedging cost. Bank of Baroda shares closed at ₹248.22 on the NSE on August 14, up ₹0.22 or 0.09% following the bond issuance announcement.
