Incorporated in 1998, SBI Cards and Payment Services Limited is a subsidiary of SBI, India's largest commercial bank in terms of deposits, advances and the number of branches. SBI currently holds (along with its nominees) 689,927,363 Equity Shares, constituting to 74.00 % of the pre-Offer issued, subscribed and paid-up Equity Share capital of the Company.
The company the 2nd largest credit card issuer in the country, with a 17.6% and 18.0% market share of the Indian credit card market (number of credit cards) as of March 31, 2019, and September 30, 2019, respectively, and a 17.1% and 17.9% market share of the Indian credit card market ( total credit card spends) in fiscal 2019 and in the six months ended September 30, 2019.
SBI Cards offers a wide range of credit cards to individual and corporate clients including lifestyle, rewards, shopping, travel, fuel, banking partnership cards, and corporate cards, etc.
SBI Cards has partnered with several leading names across industries, including Air India, Apollo Hospitals, BPCL, Etihad Guest, Fbb, IRCTC, OLA Money and Yatra, amongst others.
As a subsidiary of SBI, the company has access to SBI's extensive network of 22,007 branches across India. The partnership enables it to market its cards to a huge customer base of 436.4 million customers.
Headquartered in New Delhi, as of September 30, 2019, the company has a sales force of 33,086 outsourced sales personnel operating out of 133 Indian cities.
Headquartered in New Delhi, as of September 30, 2019, the company has a sales force of 33,086 outsourced sales personnel operating out of 133 Indian cities.
The company's total income increased at a CAGR of 44.9% and the revenues from operations have increased at a CAGR of 44.6% between fiscal 2017 to 2019. The net profit grew at a CAGR of 52.1% during the period.
According to a report by Macquarie, the IPO is expected to be around Rs 9,000-9,600 crore in size. The IPO is likely to hit the markets early next year.
SBI, which holds a 74 percent stake in the unit, along with private equity firm Carlyle Group, which holds the rest 26 percent through its subsidiary CA Rover Holdings, will together sell 13 crore shares or 14 percent of the company through the IPO. While Carlyle is looking to sell a 10 percent stake via the IPO, SBI would sell a 4 percent stake in the company.
How the IPO will impact the valuation of parent SBI
SBI holds a 74 percent stake in SBI Cards, which Macquarie currently values at Rs 27,500 crore in its model. However, the brokerage, citing media reports, said SBI expects a valuation of Rs 60,000 crore (2.2 times Macquarie's valuation of Rs 27,500 crore) for its share in SBI Cards, which translates to Rs 47 per share of SBI.
The brokerage notes that if value unlocking happens at this price, it would add Rs 16 or 5 percent to their current target price of Rs 320.
Could SBI Cards IPO make it the most expensive financial services company in India?
As per Macquarie, in case SBI Cards gets listed at a market cap of Rs 60,000 crore, it could be the most expensive financial services company in India at 11 times the book value (P/BV).
"As such there are enormous growth prospects for the credit card industry as it is significantly underpenetrated and economics of the business for successful players have significantly improved post-global financial crisis," the report quoted.
India's credit card industry
Business models have also become more sound with 50 percent of revenues coming from stable fee income thereby significantly boosting RoE in credit cards business at over 30 percent, said the brokerage.
Credit card issuances remain strong at 25% year-on-year (y-o-y) in the three months till June this year– a trend that we have broadly maintained since demonetisation. The three frontline private banks (HDFC Bank, Axis Bank and ICICI Bank) along with SBI Cards and Payments dominate this business with 70% share between them. RBL Bank is a relatively new player but is emerging strongly on the back of its partnership with Bajaj Finance. Despite strong growth in issuances, penetration is quite low at 4% as compared to 60% of population using cards.
Notwithstanding the cyclicality that is inherent to this business, Market experts believe that the Indian banks would continue to show solid growth in issuances given the demographic advantage and strong investments in payment infrastructure.SBI Cards is the second-largest credit card issuer in the country with 9.46 million credit cards and has an 18 percent share of the Indian credit card market as of September 30, 2019. Meanwhile, HDFC Bank has the largest credit card business in the country with 13.3 million cards issued, while ICICI Bank stood third with 7.9 million credit cards, as of September 30, 2019, according to data from the Reserve Bank of India.
The share sale is poised to become the fifth-largest IPO in the country after Coal India, Reliance Power, GIC Re, and Oil and Natural Gas Corp and will help the parent, SBI, raise funds to boost credit growth. For FY19-20, it will be the largest IPO.
SBI Cards IPO Dates & Price Band: (Tentative)
| IPO Open: | 20-January-2020 |
| IPO Close: | 22-January-2020 |
| IPO Size: | Approx ₹9500 Crore (Approx) |
| Face Value: | ₹10 Per Equity Share |
| Price Band: | ₹615 - ₹618 Per Share |
| Listing on: | BSE & NSE |
| Retail Portion: | 35% |
| Equity: | 130,526,798 Shares |
| Discount: | ₹18 Per Shares |
SBI Cards IPO Market Lot:(Tentative)
| Lot Size: | Minimum 24 Shares & Maximum 312 Shares |
| Minimum Amount: | ₹14832 |
| Maximum Amount: | ₹192816 |
SBI Cards IPO Allotment & Listing:(Tentative)
| Basis of Allotment: | 27-January-2020 |
| Refunds: | 28-January-2020 |
| Credit to Demat Account: | 29-January-2020 |
| Listing Date: | 30-January-2020 |
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