SBI Cards IPO: The initial public offer (IPO) of SBI Cards and Payment Services, the credit card unit of the country's largest lender SBI, is likely to be launched this year. SBI Cards had filed the draft red herring prospectus with market regulator Securities and Exchange Board of India (SEBI) on November 27 last year.
Here's a look at five things to know about the upcoming IPO:
1. The card unit of SBI plans to raise around Rs 9,600 crore through the IPO. SBI Cards has 18% market share next to HDFC Cards that holds 27% market share. The company had 9.4 million outstanding cards as of the end of September. According to the draft prospectus, the company expects the number of credit cards to increase at an annual rate of 25% per year.
2. Ahead of announcement of the IPO, total number of public shareholders in SBI has increased to 18.54 lakh at the end of December 2019 from 14.95 lakh as on 30 September 2020, as per the latest shareholding pattern of SBI available on BSE. Individual shareholders of SBI can apply under the retail (investment up to Rs 2 lakh) as well as shareholder category (investment up to Rs 2 lakh). If an SBI shareholder is also an SBI employee, he or she is also eligible to apply in the category of employees (investment up to Rs 5 lakh)
3. With the listing of SBI Cards on bourses, the firm will become the fifth group company under SBI Group to be listed on exchanges. The IPO involves offer for sale for promoters to exit and fresh issue funds to augment capital base. While the company will not receive any proceeds from the Offer for Sale (OFS), the net proceeds generated from the fresh issue are proposed to be utilized for augmenting the capital base to meet company's future capital requirements .
4. As part of the IPO process, its promoters, namely Carlyle Group, and State Bank of India (SBI) will make partial exit from SBI Cards and Payment Services Ltd. SBI and Carlyle are reportedly paring their stakes through Offer for Sale (OFS) process by 4% and 10% respectively. Washington-based Carlyle Group being a private equity (PE) firm (that invests in the initial phases of business and then exits later) will be offloading 10% stake, amounting to Rs 6,500 crore. The stake sale could be India's largest-ever PE exit through a public listing in India
5. Currently, SBI Cards is rated AAA and A1+ by both rating firms CRISIL and ICRA. As per Crisil's report, SBI Cards is the leading player in open market customer acquisition in India.