The listing of SBI Cards and Payment Services was largely on expected lines given the market turmoil which wiped out around Rs 36 lakh crore of investor wealth in about 2 months due to novel coronavirus spread.
The stock opened nearly 13 percent lower at Rs 658 on the BSE against issue price of Rs 755. It managed to hit its issue price intraday in morning trade, but could not hold the same for long.
At the time of publishing this copy, it was trading at Rs 730, down 3.3 percent from IPO price. The total traded share volume on exchanges stood at around 4.8 lakh crore so far.
Given the weak market conditions, most experts advised selling shares of SBI Card now and holding cash to buy the same later once the coronavirus-led dust settles down as they all are bullish on the stock for long term.
"We suggest investors who receive allotment may exit once at listing price," Manali Bhatia, Senior Research Analyst at Rudra Shares & Stock Brokers told Moneycontrol.
Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor and Prashanth Tapse, AVP Research at Mehta Equites also said investors should try to book listing gains for the time being and prefer to seat in liquid cash position than holding the stock.
Investors should wait for the right opportunity to add the stock to portfolio in staggered manner in any dip, both advised. Participants who are also looking for liquidity can sell the stock on listing amidst poor market sentiments and uncertainty, Nirali Shah, Senior Research Analyst at Samco Securities said.
As far as the buying on listing day is concerned, Manali Bhatia said investor may wait for the price to get stable & can be bought to the levels of Rs 650-700 per share on the listing day.
All analysts or every investor remains bullish on the stock with a long term perspective given the expected robust growth in credit card industry, though there is a panic-led correction in the stock for short term.
"Given top 4 players including State Bank of India dominating more than 70 percent market share (FY19), SBI's strong parentage, sound fundamentals, niche business and extreme growth outlook, SBI Card to command high P/E and will get advantage for the same. We still remain bullish for the stock for the price target of Rs 1,250 in next 1 year," said Manali Bhatia.
Gaurav Garg expects double-digit return in the stock for next five years, based on strong financials and its prospects of growing credit card market.
"Amidst global turmoil, one should wait and not jump on the listing day, as stock may face correction and investor may get opportunities to accumulate it later. We expect a target of 1,100 for next one year on the stock," he said.
SBI Card, a 2 decade old business engaged in issuing credit cards to consumers in India, stands the 2nd largest credit card issuer in India, being one of the leading providers of credit cards with 18.1 percent market share of the Indian credit card market in terms of the number of credit cards outstanding and 17.9 percent market share of the Indian credit card market in terms of total credit card spends 2019.
SBI Cards has a diversified customer acquisition network across multiple channels and open market point of sales & access to extensive network of SBI’s vast customer base of 44.55 crore customers.
"The company has sound fundamentals and growth potential, therefore patient investors can hold it for the long term or till they make sufficient gains on their positions. Given the current scenario, it might take some time before the stock makes a good 15-20 percent returns. But one should not enter new positions at least till the dust settles," Nirali Shah said.
According to Prashanth Tapse, if in any case the listing goes discount by 10-15 percent to issue price one can look for accumulate phasewise for those investors with long term view for a one year target Rs 1,100-1,150.
"We assume favourable industry growth dynamics with strong levers like rising discretionary spends and significantly underpenetrated Indian credit card industry in place to drive sustainable, profitable growth gives SBI Cards a competitive advantage for long term play," he reasoned.
Jaikishan Parmar, Senior Equity Research Analyst at Angel Broking also said long term investors should not worry as over the long term price will follow the fundamental of the SBI Card. "SBI Card has very strong fundamentals and healthy growth prospects considering low penetration in India and sourcing from existing SBI clients."
SBI Card launched the IPO for subscription during March 2-5 and garnered Rs 10,340 crore from investors. Parent State Bank of India reduced its stake in SBI Card to around 70 percent and global investor CA Rover, an affiliate of Carlyle Group, to around 16 percent post issue.
Hardayal Prasad, MD & CEO at SBI Cards & Payment Services remains confident about credit card industry growth going ahead.
"We need to consider a lot of the growth has come due to digitalisation right from demonetisation and due to launch of different products, people are confident about making payment through credit cards or lowering cash payments," he said in an interview to CNBC-TV18.
Prasad feels that the credit card industry is yet to realise its full potential as most people in India still use cash for most day-to-day transactions.
"Hence, we will still continue to see good growth as cash payment system has slowly been moving to credit cards."
"I don't look at industry numbers, but the main thing is we listen to consumers, we come out with different products. If a company will be able to do that, digitise, then that will help credit card growth story to continue and I will be very realistic about robust growth ahead," he said.Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.