SBI Cards IPO oversubscribed 15.49 times on day 3 despite weak market

The initial public offering (IPO) of SBI Cards and Payment Services received an overwhelming response from investors on the third day of the bidding process, in an otherwise weak secondary market. The issue was oversubscribed 15.49 times on the third day of the bidding process, while qualified institutional bidders (QIB) portion subscribed over 57.1 times till now.

The portion set aside for retail bidders saw 1.76 times subscription, while non-institutional investors saw 1.47 times subscription. The reserved portion of employees was subscribed 3.29 times, while that of SBI shareholders saw 3.5 times subscription.

The IPO of the second-largest card issuer of the country received bids for over 155 crore equity shares against IPO size of 10.02 crore equity shares, as per data available on the National Stock Exchange (NSE).

The company offer received bids for 7.91 crore shares at a cut-off price as compared with the issue size of 10.02 crore equity shares.

Although traders said that the issue got impacted by the seven-day losing streak of the equity market and fears of coronavirus reaching national capital, the SBI Card IPO saw over 87% subscription on its second of bidding, with retail and employee portion fully booked. The IPO started on a muted note with just 39% subscription on the first day of the issue.

The issue will remain open till March 5 for all other investors, while March 4 is the last day for qualified institutional bidders (QIBs).

As per the company's Draft Red Herring Prospectus (DRHP) filed with SEBI, the fund proceeds will be used as growth capital for the company.

Phillips Capital in its IPO note said that SBI Cards trades at a PE multiple of 38.4x/30.3x at the upper band, as per its FY21 and 22 estimates. The research firm further estimated a SBI Cards' market capitalisation at around Rs 70,400-70,900 crore (USD 9.38-9.45bn).

"SBI Cards is likely to deliver superior earnings Compound annual growth rate (CAGR) of 39% over FY19-22 translating into Return on average assets (ROAA) of 5.8%/5.7% and return on average equity (ROAE) of c.29% in this period," Phillips Capital said in its IPO note on March 2, 2020, and rated 'SUBSCRIBE' for the issue.

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