SBI Bond Allotment is Complete

by Manshu on March 17, 2011

in Fixed Deposits

Shiv left a comment yesterday informing everyone that the SBI Bond allotment has now been completed and the bonds will list on the 23rd of March 2011.

You can check your allotment status on this link.

Further, Neel has left a comment about receiving a 7% interest in his bank account already.

There have been quite a few comments about when the dates for this will be announced so I thought I’d do a small post with this information.

Thanks to Shiv and Neel for sharing this information!

 

{ 28 comments… read them below or add one }

Srikanth March 17, 2011 at 7:57 pm

Thanks for the Link…

I checked and I have been allotted all units i applied .

But i didnt understand the “Refund Amount 327.00 ” is.

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Shiv March 18, 2011 at 6:07 am

Hi Mr. Srikanth

Its the interest amount on your investment from the Deemed Date of Investment till one day prior to the Deemed Date of Allotment.

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Manshu March 18, 2011 at 7:21 am

Hi Shiv, there was a comment about buying an infra bond – I am pasting the link below – may be you can check out.

http://www.onemint.com/2010/10/12/idfc-infrastructure-bonds-faq/comment-page-3/#comment-133913

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Girish Thakkar March 17, 2011 at 9:20 pm

Please give BSE code for SBI Bond Series 3 tier II and Series 4 Tier II which is going to be listed on 23-3-11

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Manshu March 18, 2011 at 7:46 am

Sorry, but I’m not aware of that.

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Neel March 21, 2011 at 4:51 am

May be, SBIBONDSIII and SBIBONDSIV. But let’s see…

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Shiv March 17, 2011 at 10:33 pm

I hope the bonds are going to list at a premium of 4-7%… there would be a lot of retail investors to book profits at this premium.. but we need buyers for that as well which it looks like will be hard to find in good nos.

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Manshu March 18, 2011 at 7:46 am

I hope not Shiv – people might make a few bucks on this one, but it will lead down the same ridiculous IPO road where more people lose money than make it, and everyone is in this crazy rush to make a quick buck. Long term – I think listing gains will have a perverse effect on this market.

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Shiv Kukreja March 18, 2011 at 10:36 am

Hi Manshu.. I hope it should not go that ways. Firstly there is a difference between equity IPOs & the Fixed Coupon Bond offerings like this one from a Bank like SBI which is next to RBI as far as the Credit Quality is concerned. In equity IPOs, almost nothing is certain but here almost everything is certain as far as interest rates, maturity amount, maturity period, issuer’s credit quality etc. are concerned. Secondly I firmly believe that Fundamentally Good IPOs sail through against the tide even in bad times. Same applies to these bonds. I cant think of any other Corporate House other than SBI which should get a better rating to its Fixed Income Offering.

You are right in stating that Listing Gains will have a perverse effect on this market and though I was surprised by SBI’s decision to offer such a high interest rates to the retail investors, there will be positive as well as negative effects of this. Positive effect: I think this euphoria is created by SBI’s decision of high rates itself and the idea behind such high interest rates is to promote the Corporate Bond Market. These kind of listing gains will bring Corporate Bonds Market in the limelight and more money will be made available for Infra Lending & all. Negative effect: As you mentioned above, these offerings & high listing gains create a mad rush of making a quich buck which ultimately results in people losing money rather than making. But here again people themselves are to be blamed. They should understand things & never panic especially when there is a fixed income offering like this. If they find very few buyers for these bonds on the first day of listing, they should wait for a few days for the dust to settle down and book their profits as & when the buyers are there in the market offering a good price.

Corporates & HNI portion of the issue was oversubscribed 4 times at an interest rate of 9.45% for the 15 year bond & that too when it was made clear that the offering is on “First Come First Serve” basis. It shows that there is a huge demand for SBI Bonds even at 9.45%. So there would be buyers at 9.95% for sure as there is no restriction on QIBs buying from the Retail Investors. Its just that they would also be bargain hunting & would like to play with people’s sentiments. If people start panic selling on the first day of listing, Institutional Investors would keep lowering their offer price to buy the bonds in the market. So I think people should not be panicky/euphoric & wait for the right price to book their profits. Also SBI should not give such high rates to the retail investors in its future offerings so that the expectations remain realistic.

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Manshu March 20, 2011 at 3:37 pm

Let’s see what happens. It will be interesting to see how much premium does this one list on.

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Neel March 21, 2011 at 4:41 am

I was reading the Tranche prospectus and it stated who all have subscribed to SBI Bonds in the past. I could see names of EPF trusts of Infosys and TCS. They really need some long term instruments. Especially with the Finance Ministry okaying 9.5% interest rate for the last FY, we should see 6-7% gains. If I do not get that much, I will continue to hold it like a high yield liquid fund 😉

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Manshu March 21, 2011 at 10:42 am

9.5% has to be paid by EPFO (Employees’ Provident Fund Organisation) – is it not?

The companies themselves are not impacted by the hike of the interest rate as far as I can tell. They have to put in the matching contribution, but the interest isn’t paid by them.

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Neel March 21, 2011 at 12:50 pm

You are generally right. But some of these big companies manage their own provident funds. Infosys does for sure, and I guess TCS does that too. Infosys BPO however keeps the money with Gov. An excerpt from here -http://www.infosys.com/investors/reports-filings/annual-report/annual/Documents/AR-2010/Annual-Report/Consolidated-Financial-Statements.html-p7.html

24.1.7.c Provident fund
Eligible employees of Infosys receive benefits from the provident fund, which is a defined benefit plan. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee’s salary. The Company contributes a part of the contributions to the Infosys Technologies Limited Employees’ Provident Fund Trust. The remaining portion is contributed to the government-administered pension fund.
The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate.
In respect of Infosys BPO, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the employee and Infosys BPO make monthly contributions to this provident fund plan equal to a specified percentage of the covered employee’s salary. Amounts collected under the provident fund plan are deposited in a government-administered provident fund. Infosys BPO has no further obligations under the provident fund plan beyond its monthly contributions.

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Manshu March 21, 2011 at 4:51 pm

I was totally unaware of this – thanks for pointing it out!

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Neel March 22, 2011 at 12:51 am

If my EPF wasn’t managed by a private trust, I would have been unaware too 🙂

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rakesh agrawal March 19, 2011 at 9:54 pm

please tell me the bse and nse code for SBI Bond Series 3 tier II and Series 4 Tier II which is going to be listed on 23-3-11.
thanks

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Shiv Kukreja March 21, 2011 at 7:08 am

BSE Scrip Codes & ISIN Nos. are:

961701 & INE062A08033 (10 Years Tenure & Retail Applicants)
961702 & INE062A08041 (10 Years Tenure & Non Retail Applicants)
961703 & INE062A08058 (15 Years Tenure & Retails Applicants)
961704 & INE062A08066 (15 Years Tenure & Non Retails Applicants)

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Manshu March 21, 2011 at 10:36 am

Thanks for these codes Shiv – where did you get these?

Another comment inquiring about infra bonds here:

http://www.onemint.com/2010/11/20/infrastructure-bonds-calendar/comment-page-1/#comment-134612

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Shiv Kukreja March 21, 2011 at 8:23 am

Economic Times Article: “SBI bonds listing: Dalal Street debut likely to yield 5% returns”… Long-term investors should not sell on listing…

http://economictimes.indiatimes.com/markets/bonds/sbi-bonds-listing-dalal-street-debut-likely-to-yield-5-returns/articleshow/7750518.cms

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Neel March 22, 2011 at 12:55 am

http://www.thehindubusinessline.com/industry-and-economy/banking/article1558723.ece?homepage=true

Interesting statistics –
1. Average retail application = 2.24 Lakhs
2. Which means number of applicants = 4500 crores/2.24 lakhs = 2 lakhs.

Could help to gauge oversubscription for the next series – though OP Bhatt has promised more centers…

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Manshu March 22, 2011 at 4:08 pm

Thanks for sharing!

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Girish Thakkar March 22, 2011 at 3:18 am

gain on sale of sbi bond will be taxable as short term capital gain or interest income. If short term capital gain than concessional rate of 15% will be appliable or will be taxable as regular income

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Manshu March 22, 2011 at 4:07 pm

the gains will be short term capital gains Girish. I’m not very sure on what the rate will be though my guess is that it’d be 15%.

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Neel March 23, 2011 at 9:58 am

http://www.investopedia.com/calculator/AOYTM.aspx

Par Value : 10000
Market Value : 10300
Annual Rate : 9.95
Years to Maturity : 10 (Assuming worst case scenario if SBI exercises call after 10 years)

This gives a Yield to Maturity of 9.47%. This is at least 1% greater than any non-SBI AAA bond, I believe- please point out if I am wrong. If the market value touches 10500, the YTM is still 9.17%

What do the experts say? Am posting the Investopedia Interpretation for the laymen…

Interpretation:

A bond that pays 1 coupon(s) of 9.95% per year, that has a market value of $10,500.00, and that matures in 10 years will have a yield to maturity of 9.17%.

What does it mean? Well, bond investors don’t just buy only newly issued bonds (on the primary market) but can also buy previously issued bonds from other investors (on the secondary market). Depending on whether a bond on the secondary market is bought at a discount or premium, the actual rate of return can be greater or lower than the quoted annual coupon rate. This is why bond investors need to look at YTM, which measures the bond’s yield from the day the investor buys it to the day it expires, when the principal is paid to the bondholder.

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Neel March 26, 2011 at 3:43 am

I read somewhere in the prospectus –
Short Term : 30%
Long Term : 20% with indexation or 10% without indexation…

You can find the prospectus on SBI Capitals’ website…

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Shiv Kukreja March 23, 2011 at 10:57 am

I think the SBI Bond is grossly undervalued. It closed at Rs. 10,268 on the NSE giving an yield of 9.52%. The 11 year G-Secs. maturing in 2022 fell today by 3 bps and are trading at 8.09%. So the spread is 1.43%, which I think is on a higher side. It should be between 0.75-1% in the current scenario. At 8.84% the bond should trade at Rs. 10,720 & at 9.09% the bond should trade at Rs. 10,550. I attribute this to the “Huge Supply” from the retail investors & “Selective Buying” by the long term investors (Institutional Investors). It would be interesting to see how it moves in the next few days.

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Neel March 24, 2011 at 12:09 am

Cannot agree more. 3% is all retailers are looking at. Why would a normal guy be bothered about YTM 🙂

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Shiv Kukreja June 3, 2011 at 3:48 am

Hi

IFCI Ltd. (BSE:500106 NSE:IFCI) has now come out with its Tier II Bonds Issue fetching 10.75% interest. The issue is quite similar to the SBI Bonds Issue. IFCI Bonds are going to trade on BSE upon listing, so though the duration of 15 years is quite long, liquidity will not be a problem.

Key Points of the Issue are:

> Interest Rate of 10.75% p.a. (15 Years) & 10.5% p.a. (10 Years), which makes the issue quite attractive
> Easy liquidity as the bonds are going to list on BSE
> No TDS
> Issue Size: Rs. 150 Crores with a “green-shoe option” to retain over-subscription
> Bonds will be issued in the Demat mode only

The bonds are most suited to those investors who want to earn better interest on their investments as compared to Bank Fixed Deposits. Issue opens on June 1st & Closes on July 15th but its expected that the issue will get closed much before July 15th as & when IFCI achieves its target.

To invest in IFCI Tier II Bonds (10.75% or 10.5%) or for any other info you can Call/SMS us at 9811797407 (For Delhi, Gurgaon & Noida).

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