SBI Cards IPO subscribed over 15 times despite turmoil in secondary market

Initial public offering (IPO) of SBI Cards and Payment Services (SBI Cards),  country’s second-largest credit card issuer, has got a thumbs up from institutional investors despite turmoil in the secondary market.

The so-called qualified institutional buyer (QIB) segment was subscribed 57x, with cumulative bid amount crossing a record of Rs 1 trillion. Nearly half of the bids in the QIB segment came from overseas investors. 

Wednesday was the last day for QIB bidding. Overall, the IPO has been subscribed 15.2x. The other segments of the IPO, too, have already seen more demand than shares on offer. Market players say the strong demand from institutional investors will spur other investors, including high-net-worth individuals (HNIs), to bid aggressively.

Most brokerages have recommended their clients to “subscribe” to the SBI Cards IPO. The price band for the IPO was from Rs 750 to Rs 755 per share. At the top-end, the stock is valued at 46x its earnings for the first nine months of 2019-20.

“SBI Cards offers investment opportunity in unique business model with strong profitability. Sustainability of higher business growth and strong return ratios, justifies premium valuation for the business,” says a note by ICICI Direct. 

SBI Cards IPO is the fourth largest in the domestic market after Coal India (issue size Rs 15,200 crore), Reliance Power (Rs 11,700 crore) and GIC Re (Rs 11,373 crore). While the SBI Cards issue size is Rs 10,300 crore, the company has already allotted shares worth Rs 2,800 crore to anchor investors.

Through the IPO, SBI Cards is looking to raise Rs 500 crore worth of fresh equity issuance to beef up its capital base. The remaining Rs 9,800 crore is secondary share sale by parent State Bank of India (SBI) and private equity major The Carlyle Group.