The much-awaited initial public offer (IPO) of SBI Cards and Payment Services will most likely happen in this quarter, SBI chairman Rajnish Kumar said. SBI Cards is the credit card unit of the country's largest lender SBI. SBI Cards plans to raise around Rs 9,600 crore through the IPO.
Penetration of credit cards in the country is very-very low. With development in the economy, demand for credit and credit cards will increase, Kumar told The Economic Times.
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.
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.
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. 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.
By Aseem Thapliyal