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YES Securities IPO report on SBI Cards

The Rs100bn+ IPO of SBI Cards represents a unique proposition for investors in multiple ways viz. a) first credit cards/payments company to get listed (only proxy to the fast-growing digital payments space), b) company is the 2nd largest credit card issuer with 18% market share in cards outstanding and spends, c) demonstrated faster business growth than industry (card spends grew 54% v/s industry’s 36% over F17-19) without dilution in asset quality and profitability metrics, aided by a diversified cards portfolio and tapping potent acquisition channels/markets (co-branding and SBI branches/ Tier 3-4 locations and non-salaried customers), d) ability to deliver 6% RoA and 30% RoE with a conservative Tier-1 capital ratio of 16-17%, and e) strong promoter SBI (69.5% stake post-issue) and a low free-float of 14.5% (rest 16% held by Carlyle Group).

Valuation and Outlook

Second largest credit card issuer in India with deep industry expertise and a demonstrated track record of growth and profitability.  Diversified customer acquisition capabilities.  Support of a strong brand and pre-eminent promoter - SBI .  Diversified portfolio of credit card offerings. Advanced risk management and data analytics capabilities.  Modern and scalable technology infrastructure.  Highly experienced and professional management team.

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