SBI Cards IPO: Price Band Set At Rs 750-755 To Raise Over Rs 9,000 Crore

SBI Cards and Payments Services Ltd. has set the price band for its initial public offering that is aimed at raking in more than Rs 9,000 crore.

The joint venture between State Bank of India and Carlyle Group set the price at Rs 750-755 apiece for the issue, which will remain open from March 2-5, according to an exchange filing. A discount of Rs 75 a share will be offered to eligible employees, it said.

The IPO, which values SBI Cards at Rs 70,000 crore at the upper end of the price band, will comprise a fresh issue worth Rs 500 crore and an offer-for-sale of 13.05 crore equity shares. SBI will sell a 4 percent stake in the card business and Carlyle Group will pare 10 percent, Dinesh Khara, managing director (international business and subsidiaries) at SBI, said at a press meet on Tuesday.

SBI currently holds 76 percent stake in SBI Cards and the rest is held by the private equity firm. Launched in October 1998 by SBI and GE Capital, SBI Cards is India’s largest credit card issuer after HDFC Bank with 18 percent market share. In December 2017, SBI and Carlyle Group acquired GE Capital’s stake in the company.

Hardayal Prasad, MD and chief executive officer at SBI Cards, said the company’s strength was in having built a strong customer base by accessing the open market, rather than issuing cards to captive customers like other banks.

About 52 percent of the company’s business comes from the open market and the rest is split between SBI and nine other banks, he said. “We have recently gotten access to SBI’s customer base and have already carded 2.1 million customers through that,” Prasad said. “Our expectation is that the base of customers from the open market and those from our banking association will be equal.”

Ambit Capital rated SBI Cards’ overall competitive position as “positive” on account of low penetration for cards among SBI’s customers and strong distribution channels. The customer base is expected to grow 23 percent over financial years 2019-24, the brokerage said in a report. But stagnating spends and market loss to Unified Payment Interface (UPI), it said, could pose as challenges.

SBI Cards, however, doesn’t see UPI as a major challenge. Prasad said it was capable of adapting to any challenge in the future.

Kotak Mahindra Bank, Axis Capital, BofA Securities, HSBC Securities, SBI Capital Markets and Nomura are the lead managers for the fundraising.

SBI Cards, Prasad said, saw its delinquencies rise in early 2018. It, however, managed to keep the rise in check through risk management measures. The main reason behind the rise in delinquencies was that the company experimented with some new markets after demonetisation, which did not work out the way it was expected to, he said. The company now aims to keep its non-performing assets at 2.4-2.5 percent of the gross outstanding advances.

Watch | SBI Cards’ management on the company’s Rs 9,000-Crore IPO