The much-awaited IPO of the year is here. SBI Cards and Payment Services, the credit card unit of the country's largest lender State Bank of India. It is the second-largest credit card issuer in the country. The company, which had filed draft IPO papers in November, obtained "observations" from the Securities and Exchange Board of India on February 11.
The initial public offering of SBI Cards will open on March 2. The company aims to raise around Rs 10,340 crore ($1.4 billion), making it the largest Asian IPO in 2020 and fourth-biggest domestic IPO. The IPO will be a mix of fresh issue and an offer for sale (OFS). The company plans to issue new shares worth Rs 500 crore and will offer up to 130.5 million shares for sale, the prospectus, dated Feb.18, showed. The bidding process will close on March 5. The company has set the price band for the share sale at Rs 750-755. The bid lot for the offer has been finalised to be 19 equity shares and in multiples of 19 equity shares thereafter.
Brief history about the company
SBI Cards was launched in October 1998 by SBI and GE Capital.In December 2017, SBI and The Carlyle Group acquired GE Capital's stake in the company. At present, SBI holds 74 per cent and Carlyle 26 per cent in SBI Cards.
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 and public will hold 14%. 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.
About the offer
The net proceeds of the fresh issue are proposed to be utilised for increasing the capital base to meet the future capital requirements. Additionally, the company expects to achieve the benefit of listing of the equity Shares on the stock exchanges.
50 per cent of the issue has been reserved for QIBs (Qualified Institutional Buyers), and 15 per cent for Non- Institutional Bidders (NIBs) and 35% for Retailers.
Normally, IPOs are open for subscription for three days but SBI Cards IPO will run for four days. The first three days, i.e. from March 2 to March 4, the issue will be open for all bidders - QIBs, NIBs, and Retail investors (including SBI shareholders and employees). However, the fourth day - i.e. March 5 - will be exclusively for Retail investors only. For QIBs, the offer will close on March 4.
Ambareesh Baliga, an independent market expert said investors should definitely suscribe to the IPO because of the company’s financial track record, high return ratios, and growth potential.
He said SBI Cards IPO will not be a multi bagger like IRCTC, but expected to give 50% return on listing.
Listen to the podcast to know more