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SBI Cards IPO will close on March 5 (iStock)
SBI Cards IPO will close on March 5 (iStock)

SBI Cards IPO fully subscribed: Key things to know before you invest

  • The price range for SBI Cards IPO has been fixed at 750-755 per share
  • There is a reservation for SBI shareholders

The IPO of SBI Cards, which opened for subscription on Monday, was 1.69 times subscribed as of 10:30 am today. Some analysts expect the issue, which will remain open till March 5th, to get a strong response from investors. SBI Cards and Payments Services Ltd, the credit card subsidiary of the country's largest lender State Bank of India (SBI), aims to raise over 10,000 crore through this initial public offering. The price range for the IPO has been fixed at 750-755 per share.

Ahead of the IPO, SBI Cards has raised 2,769 crore from 74 anchor investors, including Singapore government, Monetary Authority of Singapore, HDFC Mutual Fund, Government Pension Fund Global and Birla Mutual Fund. Anchor investors are institutional investors who are offered shares in an initial public offering (IPO) ahead of its opening.

Lot Size and Listing

Bids can be made for a minimum of 19 equity shares and in multiples of 19 equity shares thereafter. At the upper end of the price range, one lot will cost 14,345. Link Intime India Private Limited is the registrar of the IPO and it will manage the allocation.

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. To apply for this category, SBI shareholders should have had SBI shares as on February 18, 2020.

18.4 lakh shares also reserved for eligible employees of SBI and SBI Cards. An employee discount of 75 per equity share will be offered to eligible employees.

About SBI Cards IPO

SBI Cards IPO consists of an offer for sale of about 13 crore shares by SBI and Carlyle Group and fresh issue of 500 crore which will be used for augmenting the capital base. SBI Cards is 74% owned by SBI while Carlyle Group owns the remaining 26%. SBI will divest 4% of its stake, while Carlyle is set to sell 10% of its stake.

SBI Cards & Payment Services (SBIC) is a subsidiary of SBI and the second largest credit card issuer in India with 18% market share in terms of cards outstanding, with 9.83 million credit cards outstanding as of November 30, 2019 and 1,03,200 crore in total of credit card spends in fiscal 2019.

It also is the largest co-brand credit card issuer, having partnerships with several major players. It will become the only listed company in India in this space.


SBI Cards revenue model includes both non-interest income (primarily comprised of fee-based income such as interchange fees, late fees and annual fees, among others) as well as interest income on the receivables when cardholders roll over their dues. The share of interest income was 52% of the total income in FY19, falling from 56% in FY17. The share of non-interest income has improved to 48% of the total pie from 39% in FY17.

Revenues 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.

Risk Factors

Apart from highly competitive credit card market, SBI Cards also faces competition from new-age fintech led payment modes including Unified Payment Interface (UPI) and mobile wallets. Credit card receivable portfolio falls under the unsecured retail category, thus presenting a greater credit risk. SBI Cards aims to keep the proportion of non-performing assets at 2.4%-2.5% of its total assets, Chief Executive Officer Hardayal Prasad said. Its gross non-performing assets stood at 2.47% at the end of last year, down from around 2.9% in March 2018.

A slowdown in economic growth can result in rising NPAs and slower growth as has been witnessed in past. 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.

What Analysts Say

“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. At the upper price band, the offer is valued at 12.6 times FY20 (estimated) book value (on annualized and fully diluted basis) and 45.8 times estimated FY20 earnings. Strong growth, stable asset quality and superior return ratios provides comfort and justifies premium valuation. Further, being the first in the segment to get listed, it could generate high investor interest," said domestic brokerage Motilal Oswal, which has recommended “subscribe" to the IPO.

Angel Broking also recommends subscribe to the issue. “Although the 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," it said.

Vinod Nair, head of research at Geojit Financial Services, says SBI Cards also has the strong parentage of SBI, which provides access to its extensive branch network and is also the first in credit card industry to be listed, which could give it a premium valuation.

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