SBI Cards and Payment Services (SBI Cards), a subsidiary of State Bank of India (SBI), has allotted nearly Rs 2,800 crore worth of shares to anchor investors ahead of its initial share sale, starting on Monday.
Anchor investors are institutional investors who commit to subscribe to the shares in an initial public offering (IPO) ahead of its opening. Other investors look at the demand and the quality of the anchor book to decide whether to apply for the IPO.
Total 36.7 million shares have been allotted to 75 anchor investors at Rs 755 apiece, the top-end of the IPO price band. Some of these investors are sovereign funds belonging to the Singapore and Kuwait governments, Fidelity, Nomura, BNP Paribas, GMO, and Blackrock. Among the 12 mutual funds who got the allotment of shares for their 48 schemes are ICICI Prudential MF, Birla MF, Axis MF, and Kotak MF.
Shares allotted to anchor investors are subject to a 90-day lock-in period. Investment bankers said there was more demand than shares on offer in the anchor category. Market players said that anchor demand came on a day when the domestic markets saw one of their worst-ever crash boded well for the IPO.
SBI Cards IPO opens on Monday and closes on Thursday. The company has set a price band of Rs 750-755 per share. At the top end, the issue size works out to Rs 10,355 crore ($1.4 billion), making it the largest Asian IPO in 2020 and the fourth-biggest domestic IPO.
The IPO will comprise Rs 500 crore worth of fresh equity issuance, which will be used to strengthen the country’s second-largest credit card company’s capital base. The bulk of the IPO will be a secondary share sale by parent SBI and private equity major Carlyle.
The largest public sector bank is offloading a 4 per cent stake in the IPO, while Carlyle will sell a 10 per cent stake.
After the issue, SBI’s stake will drop from 74 per cent at present to 70 per cent, while Carlyle will see its holding come down from 26 per cent to 16 per cent. The PE had bought the stake in 2017 from the lending arm of General Electric for about Rs 2,000 crore. The value of the stake has jumped to Rs 18,400 crore.
The public shareholding in SBI Cards will be 14 per cent after the listing, which will have to be enhanced to 25 per cent within three years.
SBI Cards will be the first credit card company to list in the domestic markets. The company will command a market capitalisation of nearly Rs 71,000 crore, making it India’s 38th most valuable company.
SBI Cards’ valuation could exceed the Rs 1 trillion mark, going by the grey market premium. According to market operators, the stock is changing hands at a premium of 45 per cent (Rs 1,100 per share) in the unofficial market. The SBI Cards IPO will be a test for investor appetite, which has been battered by the coronavirus outbreak.