SBI Cards IPO opens today: The SBI Cards IPO, India's fifth-largest, and the first from a pure-play credit card company are set to open for subscription today. The issue will close for subscription on March 5. The IPO Committee of SBI Card has set the price band for its initial public offering (IPO) in the range of Rs 750-755 per equity share.
SBI Cards is 74% owned by the SBI while Carlyle Group owns the remaining 26%. Carlyle bought the stake in 2017 from GE. As part of the IPO, SBI will divest 4% of its stake, while Carlyle will sell 10% of its stake. SBI and Carlyle Group will offload 3.73 crore shares and 9.32 crore shares respectively.
The IPO comprises a fresh equity issue worth Rs 500 crore and an offer for sale of up to 130,526,798 equity shares. This will include up to 37,293,371 share sale by SBI and up to 93,233,427 shares on offer by Carlyle Group, the company said in its prospectus.
What analysts or brokerages have to say:
According to Moneycontrol, all brokerage has advised subscribing to the issue. "Compared to the industry which sources 70 per cent from Banca & 30 percent from the open market, SBI Cards has much lower Banca proportion. However, since the past couple of years, SBI Cards has been working with SBI to increase the proportion of branch sourcing which has increased from 35.2 per cent in FY17 to 51.6 per cent for 9MFY20. There is still huge untapped potential to increase business from SBI branches which have a wide network," ABM Equity told Moneycontrol.
"We expect SBI Cards to continue to register healthy CAGR over FY2020-24 owing to (a) Significantly underpenetrated Indian credit card market; a number of credit cards per 100 people are 3, whereas in developed/developing countries it is more than 30. (b) As on Q3FY2020, credit card to debit card ratio was 3.7 per cent for SBI Cards (versus peers viz. HDFC Bank – 45 per cent, Axis Bank – 28 per cent and ICICI Bank – 18 per cent), which clearly indicates huge scope for mining SBI Bank customers. (c) Total credit card outstanding loan as a percentage of banking sector loan is just 1.22 per cent, and the retail loan is 27 per cent, indicating enough space to increase credit card loan book. (d) Credit card spends as a percentage of GDP for India is 3 per cent, while that for other countries is more than 10 per cent. All the above factors clearly show that there is a huge room for credit card industry to grow," Angel Broking, which has recommended the issue told Moneycontrol.
"Focus on increasing customer base with rollout of products in tier II and III cities, emphasize on corporate card business, tapping vast customer pool of parent (SBI) is to lead to higher customer base. Technology up-gradation and improved partner tie-up and reward offers to induce and increase transaction volume, thereby supporting growth in business and profitability," ICICI Securities said.
"SBI Cards intends to grow its cardholder base by continuing to expand its customer acquisition capabilities. As part of this strategy, it aims to increase the number of open market physical points of sale that it operates across India. In particular, it is focused on increasing its presence in India’s tier II and tier III cities where its cardholder base has historically been underrepresented, but which has contributed an increasing proportion of its new accounts in recent years," CNBC TV 18 quoted HDFC Securities as saying.