SBI Cards IPO Subscribed 39% On First Day Of Bidding
Against an issue size of 10.02 crore shares, SBI Cards IPO has received bids for 3.94 crore shares—indicating 39% subscription.
India’s first billion-dollar initial public offering in at least two years is off to a steady start.
The IPO of SBI Cards and Payments Ltd. was subscribed 39 percent as of 5:00 p.m. on Monday, the first of the four-day share sale. Against an issue size of 10.02 crore shares, the SBI Cards IPO has received bids for 3.94 crore shares, with retail investors making the bulk of the purchases.
According to National Stock Exchange data, the portion of shares reserved for retail investors was subscribed 18 percent while non-institutional investors picked up about 3 percent of the shares earmarked for them. Qualified institutional buyers have so far bought only 532 of the 2,42,24,003 reserved for them. The company’s employees and SBI shareholders picked up 1 percent and 18 percent of the shares allocated for them.
The cards subsidiary of India’s largest lender State Bank of India raised Rs 2,769 crore by selling 3.66 crore shares to 74 anchor investors in a pre-IPO placement Saturday.
SBI Cards, according to its red herring prospectus, aims to raise up to Rs 10,350 crore by selling 13 crore equity shares in a price band of Rs 750-755 apiece. The bid lot size is 19 equity shares and multiples thereof. State Bank of India is selling 4 percent stake in SBI Cards while joint venture partner Carlyle Group is paring 10 percent shareholding.
According to BloombergQuint’s calculations, the company will have a market valuation of nearly Rs 70,900 crore at the upper end of the IPO price band.
To be sure, SBI Cards—India’s second largest card issuer after HDFC Bank Ltd.—is not comparable with banks as it is the nation’s only pure-play card issuer. Half of the company’s income comes from interest and the other half comes from annual fee charged to customers. Interest income is cyclical, while the fee income is fixed.
Going forward, the company sees smaller towns driving growth after listing, Chief Executive Officer Hardayal Prasad told BloombergQuint in an interview.
WATCH | IPO Adda With SBI Cards CEO Hardayal Prasad
Also Read: SBI Cards IPO: How To Value The Credit Card Company
Penetration in Tier-2 and Tier-3 towns is “pretty low and people have aspirations over there", Prasad said. This, added to the expansion in the number of point-of-sale machines installed from 1.1 million to over 4 million and the e-commerce boom, has led to increased adoption of credit cards even from smaller centres, he added.
Also Read: SBI Cards IPO: All The Details You Need To Know Before Subscribing
Prasad said SBI Cards’ business model is unique and should be looked at it as such. Valuing the company using price-to-earnings rather than the price-to-book, which is typically used for lenders, is more appropriate, he believes.
Also Read: SBI Cards IPO: Is The Frenzy Justified?
When asked about growth, he said the second half of the year should be stronger than the first half. The company earned Rs 725 crore in the first half and Rs 1,161 crore profit in the first nine months of FY20. “Second half of India is always a busy season.”