Updated: Mar 2
The wait is over, The Rs 9,000-crore initial public offering SBI Cards and Payment Services will open for subscription on March 2. The company is the second-largest credit card issuer in India with nearly 18% market share. SBI Cards was launched in October 1998 by SBI and GE Capital. In December 2017, SBI and Carlyle Group acquired GE Capital’s stake in the company. I will talk about two things here: 1) SBI Card IPO Analysis 2) How to Apply for it. SBI Card IPO 5 point Analysis 1) Basic details and Financials: IPO Date: Mar 2, 2020 — Mar 5, 2020 Price band: Rs 750–755 Market lot: 19 shares Listing date: March 16 (expected) Face value: ₹10 Per Equity Share Listing At: BSE, NSE
The company is looking to raise between Rs 8,000–9,000 crore at a valuation of Rs 53,000-Rs 60,000 crores in its initial public offer. SBI Cards, a subsidiary of State Bank of India, is India’s second-largest cards company. It commands an 18% market share of outstanding cards and 17%t of credit card spends, beaten only by HDFC Bank Ltd. The topline and bottom-line both are impressive.
2) Market share and Major competitors: There are a total of 74 players offering credit cards in India. The market, however, is dominated by four players. The top three private banks (HDFC Bank, Axis Bank Ltd., and ICICI Bank Ltd.), along with SBI Cards, which is registered as a non-bank financial company, dominate the credit card business with approximately 72% market share by a number of outstanding credit cards.
3) Earnings: In the case of SBI Cards, a significant share of earnings come from interest on credit card receivables. In addition, the company earns non-interest income primarily comprised of fee-based income such as interchange fees, late fees, annual credit card membership fees and other such charges.
The company extends credit to the cardholders through ‘revolving’ credit card accounts. Using this facility, cardholders have the option to ‘revolve’ their balances or convert their balances into monthly installments and repay their obligations over a period of time at a fixed interest rate set forth in their cardholder agreements. 4) Growth and Customer AcquisitionMuch of the growth in the credit card business for SBI Cards has historically been concentrated in India’s eight largest metropolitan areas. For SBI, until the year-ended Mar. 31, 2017, the eight top metropolitan cities contributed 67% of new accounts. This has slowly changed, with less than half of the new accounts coming from these areas in the year ended March 31, 2019. Interestingly, it is not just tier-2 cities where most cards are being sold but even tier-3 and other areas.(source: SBI Cards DRHP)
5) Delinquencies: In the last few quarters, many lenders have increased the focus on the asset quality of their unsecured loan business, sparking some concern over defaults in the credit card portfolio. In the past, particularly in the aftermath of the global financial crisis, this portfolio proved to be volatile in terms of asset quality. Since then, it is believed that credit bureaus and data analytics have made for a safer card portfolio. Data included in SBI DRHP shows that at an industry level, the delinquency rate for the credit card industry was a modest 1.5–1.8% as of March 2019. Asset quality has been largely steady for the company, with gross bad loans remaining at close to 2%.
Four things you must know if you are a retail investor.
1) 35% of the issue reserved for retail investors (around Rs 3,200 crore.) 2) If the retail quota is fully subscribed, based on the lot size of 19 equity shares, 22.5 lakh forms would be needed for a one-time subscription. 3) Considering the initial feedback on-demand and investor interest, SBI Card is expecting a huge number of applications as was witnessed in all the successful mega IPOs in the past. 4) In the SBI Card IPO, about 1.31 crore shares have been reserved for investors, who were State Bank of India shareholders as on February 20. They can apply in both retail and shareholders categories if the application amount falls within the limit of Rs 2 lakh.
How to Apply for it For apply IPO you must have an active Demat account with you. If you don’t have an active Demat account then no worries, open Demat here in 4 hours and then follow the process. 1) Login to your saving bank’s net banking. (I will take kotak bank)
2) Goto ASBA option 3) If your Demat is linked with your savings then your Demat account will appear. If you haven’t linked then first do beneficiary registration and then click on apply now.
On March 02, you will see the name of SBI card in applying now list. 4) It will now ask for big quantity and price. Drop the required details and press submit. Done! If you get the lot then hold it for the long term, in case you don’t get it then the entire fund would be released. Funds will not be debited until you get the lot. IMP: Use multiple Demat accounts to increase your chances to get the lot in IPO. Open Demat in 4 hours and follow the same process. In the unofficial grey market, SBI Cards shares are being traded at about Rs 1,080 apiece, which is a premium of Rs 330 per share, or 44% above their likely IPO price. At the grey market price, SBI Cards are valued at almost Rs 1 lakh crore. Parent SBI’s market value is about Rs 2.92 lakh crore.SBI Card IPO is expected to become of the biggest IPOs in India. This is a zero-risk investment, Don’t miss this opportunity. Thanks! Akshay Seth Linkedin | Twitter | Quora email@example.com Learn to analyze the stocks in 30 days with ESTO Get one Buy/Sell call via WhatsApp Calls Make your long term stock with Make My Portfolio Invest every month in a well-diversified portfolio with STOCK SIP