SBI Cards Expects Valuation Of Rs 53,000-60,000 Crore In IPO

State Bank of India expects a valuation of Rs 53,000-Rs 60,000 crore for its cards unit in an initial public offer for which it plans to file the prospectus this week, according to a person privy to the development.

SBI Cards’ is looking to raise around Rs 8,000-9,000 crore, the person told BloombergQuint on the condition of anonymity as the details are private.

India’s largest lender announced last month that it would divest 4 percent of its 74 percent stake in its subsidiary. The Carlyle Group, which owns 26 percent stake in SBI Cards, would divest 10 percent of its share, the person cited earlier said.

This will be followed by a primary issue of shares worth Rs 500 crore, the person said.

Commanding Higher Valuation

Brokerages have assigned an average value of Rs 18 per share for SBI Card based on parent SBI’s sum of parts valuation. That would value at around Rs unit at 24,200 crore.

If the IPO size is to the tune of Rs 8,000-9,000 crore out of which Rs 500 crore is a primary issue, then considering the remaining Rs 7,500-8,500 crore that needs to be raised, the valuation works out to between Rs 53,500 and Rs 60,700 crore, according to BloombergQuint’s calculations.

That’s because valuations are based on future growth projections and SBI Cards is looking to deliver profit of Rs 2,000 crore for the year ending March 2020 compared with Rs 727 crore in the first six months of the ongoing fiscal.

At these valuations, SBI will get nearly Rs 2,100-2,400 crore by divesting its 4 percent stake.

SBI Card, according to Jefferies, has a card base of 9.5 million, net worth of Rs 4,388 crore and capital adequacy of 18.9 percent. The company has a market share of 18 percent in the number of cards and 17.7 percent in terms of spends.

“Of its 4.4 crore customers, few have products of its subsidiaries (SBI Life, SBI Card, SBI Funds, SBI General), and there is a large scope to raise the penetration,” Citi said in a note.