SBI Cards and Payment Services’ initial public offering (IPO) has managed to attract bids worth Rs 2 trillion, in spite of challenging market conditions. This has made it among the most subscribed offerings in absolute terms.
The 100-million share offering generated close to 2.7 billion bids (26x). The high networth individual (HNI) portion of the IPO was subscribed 44x, with the retail portion being subscribed 2.5x.
The employee segment registered 4.7x subscription, while the shareholder category was subscribed 25x — making it a rare instance in which the employee and shareholder segments garnered higher subscription than the retail segment.
Shareholders of parent State Bank of India (SBI) were eligible to apply through the ‘shareholder’ category.
The institutional portion of the IPO, which closed on Wednesday, had garnered 57x subscription.
“Despite tough market conditions, the IPO did well as SBI Cards is a high-quality unique franchise from the strong SBI stable. Its business model has resonated with best of institutional Investors across the world,” said Salil Pitale, joint mananging director and co-chief executive officer of Axis Capital.
Most brokerages had recommended their clients to subscribe to the SBI Cards IPO, citing similar reasons.
“Given its dominant position in the credit card market and strong parentage, SBI Cards is well-placed to benefit from the rising trend of digital payments and e-commerce. Strong growth, stable asset quality, and superior return ratios provide comfort and justify the premium valuation. Further, being the first in the segment to get listed, it could generate high investor interest,” said a note from Motilal Oswal.
“SBI Cards offers investment opportunity in a unique business model with strong profitability. Sustainability of higher business growth and strong return ratios, justifies premium valuation for the business,” said another note by ICICI Direct.
Given the huge oversubscription, shares of SBI Cards will be priced at the upper end of the price band of Rs 750-755 per share. At the top end, SBI Cards’ post-issue market capitalisation works out to around Rs 71,000 crore, making it India’s 38th most valuable company.
SBI Cards’ IPO is the fourth largest in the domestic market. Through the share sale, the company issued fresh capital worth Rs 500 crore. Parent SBI sold its 4 per cent stake, while Carlyle sold 10 per cent in the firm.
After the issue concludes, 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.