The initial public offering (IPO) of SBI Cards and Payment Services Ltd on Monday saw decent demand from retail investors, who subscribed to more than half of the issue, notwithstanding a week-long slide in the domestic stock market over concerns about the spread of Covid-19.
Investors subscribed to 39% of the book size and at the upper end of the IPO price band of ₹750-755 apiece on Monday. Retail investors subscribed to 62%, while SBI Card employees and State Bank of India Ltd (SBI) shareholders subscribed to 80% and 69% respectively of the shares reserved for them.
The portion reserved for non-institutional investors saw relatively weaker subscription at 12%. Qualified institutional buyers did not subscribe at all.
The firm has reserved 42.78 million shares for the retail category for the IPO, expecting to raise up to ₹3,229.98 crore from individual investors.
“The retail demand has been strong and we are seeing continued interest across investor classes. However, that will depend on how the markets react over the next two days. I still expect the IPO to get oversubscribed, but the quantum could be low because of the volatility in the markets," a banker directly involved in the IPO process said, requesting anonymity.
The four-day share sale, open until 5 March, is the first IPO of 2020. It comprises a fresh issue worth ₹500 crore, with the offer for sale seeing its promoters SBI and US private equity firm Carlyle Group offload 130.52 million shares.
On Monday, ahead of its initial share sale, the credit card subsidiary of India’s largest lender raised ₹2,769 crore from 74 anchor investors. Anchor investors are institutional investors who are offered shares in an IPO before it opens. The anchor investors included the Singapore government, the Monetary Authority of Singapore, HDFC Mutual Fund, Government Pension Fund Global, and Birla Mutual Fund. Shares were allotted at the offer’s upper price band of ₹755 apiece.
“The SBI Card IPO was much anticipated among the retail investors, as 2019 was a tepid year in terms of public market issuances. Considering that the retail allocation is over ₹3,000 crore, a lot of individual investors are expected to subscribe to the offer," said Kajal Gandhi, analyst at ICICI Securities.
“The company has a unique business model with no comparable listed peers in the market. Its business is heavily concentrated in India with no real global exposure and has shown strong earnings growth. All these factors, combined with the SBI parentage, add to the lure of SBI Card IPO," Gandhi said.
The Sensex ended 153 points lower at 38,144 while Nifty settled 0.6% lower at 11,132. During the day, the Sensex swung 1,300 points from Monday’s high of 39,083 to a low of 37,785.
The premium for the stock has fallen from a high of 50% to the offering price at ₹375 on 27 February, to as low as ₹135 per share on Monday, in anticipation of lower oversubscription, said industry sources in the grey market. “Part of the reason for the correction in grey market premium is also that investors are anticipating a lower oversubscription because of volatility," said Arun Kejriwal, founder of Kejriwal Research and Investment Advisory.