SBI Cards IPO, which will open on March 2, is likely to see a bumper response from investors. The IPO whose price band has been fixed at Rs 750 to Rs 755 per share is attracting bids at a premium of 40% to the issue price in the grey market. That amounts to the stock listing at around Rs 1,000 level. The share sale will be the fifth-largest IPO ever with an aim to collect Rs 10,355 crore.
"As per industry reports in the grey market, investors are already bidding for the stock at a premium of Rs 320 which is approximately 40 per cent of the offering price. Given the euphoria and the buzz around the stock, it is widely expected that the IPO would be subscribed heavily. Retail investors would be in a position to make significant profit on listing day. Investors who are enthused by the post-IPO performance of IRCTC, Affle and IndiaMart expect SBI cards to list and perform in a similar manner, "said Rahul Agarwal of Wealth Discovery.
The firm has performed exceptionally well on the financial front with its profit after tax (PAT) rising consistently since 2017.
Net profit rose from Rs 373 crore in FY17 to Rs 601 crore in FY18. Profit rose further to Rs 863 crore in FY 19 and the firm logged Rs 1,161 crore profit in the first nine months of FY20.
Total loans and advances which form part of the firm's assets rose from Rs 9,983 crore in FY17 to Rs 23,933 crore in first nine months of FY20.
Interest income rose from Rs 17.5 crore in FY17 to Rs 20.7 crore for the first nine months of Rs 20.7 crore.
Umesh Mehta, head of research at Samco Securities said, "SBI Cards and Payments Services would be the first in the credit card space to be listed on Indian bourses. It is the most profitable vertical of SBI, its largest and only promoter, which reflects their commitment to maintain and garner growth within the overall industry. Financially as well as operationally, the company has delivered robust performance in the past three-years. Hence, the premium asked for this issue is justified giving due respect to the visible growth opportunity of the industry."
The IPO will close on March 5. Equity shares will be offered in SBI Cards IPO in a lot of 19 and in multiples of 19 equity shares thereafter. Eligible employees will be offered SBI Cards shares at a discount of Rs 75 per share.
SBI Cards plans to issue fresh shares worth Rs 500 crore (0.66 crore shares) and offer up to 13.05 crore shares (Rs 9,855 crore) for sale by promoters. SBI Cards and Payment Services is backed by State Bank of India and private equity firm Carlyle Group.
Carlyle Group and State Bank of India (SBI) will make partial exit from SBI Cards and Payment Services. SBI has 74% stake in its credit card unit. Carlyle Group, which holds 26% through its subsidiary CA Rover Holdings, will jointly sell 130.5 million shares. SBI and Carlyle will pare their stakes by 4% and 10% respectively.
Kotak Mahindra Capital Company, SBI Capital Markets, DSP Merrill Lynch, Axis Capital, HSBC Securities and Capital Markets, and Nomura Financial Advisory and Securities are the book-running lead managers to the issue.
By Aseem Thapliyal