The initial public offer or IPO of SBI Cards and Payment Services will open next week on March 2. SBI Cards will raise about ₹10,000 crore through the IPO, which will close for subscription on March 5. The company has set the price band for the share sale at ₹750-755. SBI Cards is 74% owned by SBI while Carlyle Group owns the remaining 26%. Carlyle bought the stake in 2017 from GE. As part of the IPO, SBI will divest 4% of its stake, while Carlyle will sell 10% of its stake.
SBI Cards IPO comprises issue of fresh equity shares aggregating to ₹500 crore and an offer for sale of nearly 13 crore shares. SBI and Carlyle Group will offload 3.73 crore shares and 9.32 crore shares respectively.
Analysts expect strong demand for shares of SBI Cards. “It is an excellent opportunity for IPO traders to flip it on the opening pop and expect a record demand for this issue,” HDFC Securities said in a note.
The firm’s post-issue market capitalization is estimated at up to ₹70,891 crore. Investment banks Axis Capital, BofA Securities, Nomura and SBI Capital Markets are managing the IPO.
The lot size of SBI Cards IPO has been fixed at 19 equity shares. Or in other words, bids can be made for a minimum of 19 equity shares and in multiples of 19 equity shares thereafter.
Link Intime India Private Limited is the registrar of the IPO.
SBI Cards shares are proposed to be listed on the BSE and NSE. The listing of shares may happen on 16th March, according to brokerages.
Reservation, discount for employees and SBI shareholders
SBI Cards IPO includes a reservation of 18.4 lakh shares for eligible employees. An employee discount of ₹75 per equity share will be offered to eligible employees. The maximum bid amount under the employee reservation portion by an eligible employee cannot exceed ₹5 lakh.
About 1.3 crore shares or about 10% of the issue size is reserved for SBI shareholders. SBI shareholders who had SBI shares as on February 18, 2020, can apply under the SBI shareholders category.
SBI Cards is second-largest credit card issuer in India, with about 18% market share in terms of the number of credit cards. In terms of financials, its net profit increased from ₹372 crore in fiscal 2017 to ₹862 crore in fiscal 2019 at a CAGR of 52.1%. Revenues from operations increased from ₹3,346 crore in fiscal 2017 to ₹6,999 crore in fiscal 2019 at a CAGR of 44.6%.
What Analysts Say
Yes Securities remains positive on the IPO, citing many factors: Low free-float, first credit cards/payments company to get listed (only proxy to the fast-growing digital payments space), the company is the second largest credit card issuer with 18% market share in cards outstanding and spends and demonstrated faster business growth than industry.
Umesh Mehta, head of research at Samco Securities, said: “We are all for investors to subscribe to this ₹10354.77 Cr IPO. SBI Cards and Payments Services Limited would be the very first in the credit card space to be listed on Indian bourses. It is the most profitable vertical of SBI Bank. We also cannot ignore the diversified reach of SBI Cards through a network across multiple channels, along with SBI’s vast customer base of around 44.55 crore. Financially as well as operationally, the company has delivered robust performance in the past three-years.”