SBI Cards IPO, which has been subscribed over 22 times, closes today for retail investors. For QIB or qualified institutional bidders, the issue closed on Wednesday while for all other bidders it will close today. At the end of Day 3, the category meant for qualified institutional buyers (QIBs) was subscribed 56.66 times while retail individual investors 1.77 times, according to BSE data. Price range for the offer, which closes on March 5th for retail investors, has been fixed at ₹750-755 per share. SBI Cards expects to raise around ₹10,350 crore through the IPO. Just ahead of the IPO, SBI Cards had raised ₹2,769 crore from 74 anchor investors. The IPO comprises a fresh issue of ₹500 crore and an offer for sale of 13,05,26,798 shares.
Lot size and expected allotment finalisation
The lot size is 19 shares. This means bids can be made for a minimum of 19 equity shares and in multiples of 19 thereafter. At the upper end of the price range of ₹755, one lot will cost ₹14,345.
Link InTime India Private Limited is the registrar of the IPO and it will manage the allocation. According to brokerages, the share allotment is likely to be finanlised on 11th March.
Expected listing date
SBI Cards shares will get listed on NSE and BSE. According to brokerages, the listing of shares may happen on 16th March.
Reservation for SBI shareholders
About 10% of the issue size or 1.3 crore shares are reserved for SBI shareholders. SBI shareholders should have had SBI shares as on February 18, 2020, to qualify to apply for this category.
On the other hand, 18.4 lakh shares also reserved for eligible employees of SBI and SBI Cards, who get an employee discount of ₹75 per equity share.
SBI Cards & Payment Services (SBIC), which is 74% owned by SBI and the rest by Carlyle Group, is the second largest credit card issuer in India with 18% market share in terms of cards outstanding, with about 10 million cards and ₹1,03,200 crore in total of credit card spends in fiscal 2019.
SBI will divest 4% of its stake, while Carlyle 10% in this IPO. When SBI Cards lists on the exchanges later this month, it will become the only listed company in India in this space.
SBI Cards has two major revenue streams: Non-interest income (primarily comprised of fee-based income such as interchange fees, late fees and annual fees, among others) and interest income on the receivables when cardholders cannot pay their dues on time. In FY19, interest income was 52% of the total revenue while non-interest income was 48% of the total pie.
Revenue and profit have more than doubled over the past three years. Net profit rose to ₹862 crore in fiscal 2019 from ₹372 crore in fiscal 2017 while revenues from operations increased to ₹6,999 crore in fiscal 2019 from ₹3,346 crore in fiscal 2017.
What Analysts Say
"We believe that SBI Cards is well positioned for continued growth given its strong market position with diverse product offerings, healthy financials, stable asset quality and sustained support from promoter SBI. At upper price band of ₹755, the IPO is priced at 13.5 times post issue FY20 book value and 45.8 times post issue FY20 EPS (annualised). Currently, there is no listed player in credit card space," said domestic brokerage Anand Rathi in a report. The brokerage has a subscribe rating on the issue.
Santosh Meena, senior analyst at TradingBells, expects SBI Cards IPO to be successful both in terms of subscriptions and listing gain.
"India is under-penetrated in terms of credit card market and the government has a focus on digital transactions. SBI Cards also has the strong parentage of SBI, which provides access to its extensive branch network," he said, adding that a listing gain of more than 50% could be expected.
Other domestic brokerages Angel Broking and Motilal Oswal have also given a subscribe rating on SBI Cards IPO.
"Being the first in the segment to get listed, it could generate high investor interest," said Motilal Oswal, adding that given its dominant position in the credit card market and strong parentage, SBI Cards is well placed to benefit from the rising trend of digital payments and e-commerce.
Angel Broking says that though valuations are a bit on the higher side, "we are positive on the future outlook of the company given favorable industry scenario, large untapped SBI customers and strong financial track record."
SBI Cards faces competition from new-age fintech led payment modes like Unified Payment Interface (UPI) and mobile wallets. Slower economic growth can result in rising NPAs. Also, currently interchange fees for credit cards or interest rates charged by credit card companies are not regulated. Any move to regulate these could have an impact.