SBI Cards and Payment Services, the country's second-largest credit card issuer, is expected to be the superstar IPO of 2020, as per experts.
The much-awaited initial public offering will be opened for subscription from March 2-5.
The subsidiary of the country's largest lender State Bank of India is yet to announce the price band, but sources told Moneycontrol that it is largely expected to be around Rs 750-755 per share.
As it is backed by SBI, which has a large customer base, the IPO deserves the current hefty grey market premium of Rs 310-320 per share (more than 40 percent) over the abovementioned IPO price after SEBI approval, increased from Rs 200 per share in January, experts suggest.
"Investors were eagerly waiting for quality IPOs such as SBI Cards after missing out blockbuster listings gains which were seen in the case of IRCTC, Affle (India), IndiaMART and Ujjivan SFB. SBI Cards grey market price was actively quoting around Rs 220-235 per share," Prashanth Tapse, AVP Research at Mehta Equities told Moneycontrol.
After a long waiting period in this volatile market scenario, market regulator SEBI permitted to float its initial public offering (IPO) which triggered grey market demand around Rs 320 per share, he said.
In fact, the current grey market premium is likely to increase further as the issue approaches its opening date, and there could be massive oversubscription as there may be major value unlocking, experts feel.
Tapse believes the issue will see strong oversubscription in all categories especially in shareholders one (due to its pro-rata allotment basis) which were one of the reasons stories running behind demand in the grey market.
He also expects the grey market premium to increase further in a few days going forward driven by the Indian consumption story: "Investors are keen to look at SBI Cards IPO which may unlock its true value which was seen in the case IRCTC, Affle (India) & IndiaMART."
On the basis of the higher end of the issue price band, SBI Cards aimed to garner Rs 10,352 crore through the public issue which consists of a fresh issue of Rs 500 crore and offer for sale of over Rs 13 crore shares by State Bank of India and CA Rover Holdings.
SBI will sell more than 3.7 crore shares and CA Rover Holdings over 9.3 crore shares through an offer for sale.
The second-largest player in the Indian credit cards market with nearly 18 percent market share, healthy financial ratios, supported by strong parentage, the first company to list from the credit card industry, etc would be major rationales behind the expected increase in grey market premium and massive oversubscription, experts feel.
"Generally the company which has niche business and first listing in the particular industry always attracts a lot of interest from investors. Hence SBI Cards is the first one to list in the card industry business and on top of that, it is a consumer-oriented business company growing higher than industry. Given healthy financials, niche business and first time listing from cards industry, there is a lot of interest for SBI Cards," Siddhartha Khemka, Senior Vice President, Head-Retail Research at Motilal Oswal Financial Services said.
Manish Bhatt, Independent Analyst also said key positives behind interest for SBI Cards were that it has a background and support of SBI, the bank's large network, and is also the first company listing from the cards industry.
SBI Cards is the second-largest credit card issuer in India (behind leader HDFC Bank) with the credit card base and credit card spends capturing 18.1 percent and 17.9 percent market share in the respective categories, as of November 2019.
With remarkable growth and profitability, the total credit card spends and credit cards outstanding grew at a CAGR of 34.5 percent and 54.2 percent (March 2017 to March 2019). It has 18 co-branded partnerships, the highest in the industry compared to other players. Also, as it is supported by a strong brand, it provides access to SBI's extensive branch network (22,007 branches) across India.
Experts expect huge listing gains from SBI Cards considering the oversubscription and niche business.
"Considering SBI card as a niche segment, and expected issue set to see huge subscription, we expect the listing premium should be at the current grey market premium range," Manali Bhatia, Senior Research Analyst at Rudra Shares & Stock Brokers said.
Gaurav Garg, Head of Research at CapitalVia Global Research - Investment Advisor feels SBI cards may be a superstar IPO for this calendar month, and also last two years have been splendid for the IPOs.
He believes SBI Cards will also give massive listing gains, ranging from Rs 1,100-1,300 per share. "SBI cards would see strong oversubscription, and we recommend betting on this IPO," Garg said.
SBI currently holds a 74 percent stake in the company and the rest is held by CA Rover Holdings.
The issue for anchor investors will open for a day on February 28, the day before the issue opening on March 2.
Kotak Mahindra Capital Company, Axis Capital, DSP Merrill Lynch, HSBC Securities and Capital Markets (India), Nomura Financial Advisory and Securities (India) and SBI Capital Markets are the books' running lead managers to the issue.Disclaimer: The views and investment tips expressed by investment experts 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.