MUMBAI, September 2: The State Bank of India is expected to gain about Rs 600 crore in the next five years from the just-concluded Resurgent India Bonds, JP Morgan has said in its Indian Markets Outlook released on Wednesday. "The present value of SBI's profit discounted by its maximum deposit rate of 11.50 per cent is Rs 348 crore," the report stated.Describing the RIBs as "The deal of the year", the leading US-based investment bank has said that the confidence expressed by expatriate Indians is encouraging and displays the fact that the cost at which funds have been raised imply a perceived sovereign rating three to four notches higher than the current levels. "For comparision sake, China's 2003 Yankee bond issue rated A3 by Moody's trades at a spread of 280 basis points over the 10-year US Treasury implying a dollar yield of 7.90 per cent and the RIB issue is not even sovereign risk," the JP Morgan report stated.It added that the success of the RIB issue speaks volumes of India's ability to raisesubstantial amounts even in extremely difficult market conditions and should go a long way in boosting international investors' perception about the country."It would be extremely difficult for any country in non-Japan Asia to raise similar amounts at attractive rates in current market conditions," the JP Morgan report stated.JP Morgan has further pointed out that the there is a strong case for SBI to bring as much funds as possible into the country and lend in rupees rather than keep them overseas and lend in dollars. "The benefit by doing this comes from the fact that SBI pays a mere one per cent fee for sharing the exchange risk," the report stated.According to the report, the RBI will sterilise the entire tranche of RIB inflows. It has already sterilised the first tranche by mopping up Rs 4,650 crore through open-market operations between August 21 and 24. "The RBI is expected to sterilise the second tranche of RIB inflows as well since permitting these funds to add to rupee liquidity will becontrary to its objective of squeezing surplus funds and increasing short-term rates through a one percentage point hike in CRR," the report stated.Commenting on interest rates, the investment bank has said that while demand for funds is expected to improve gradually, a sharp and sustained increase in credit pick-up during the busy season could put an upward pressure on interest rates in the latter half of the year.
