State Bank of India (SBI) subsidiary SBI Card and Payment Services initial public offer (IPO) will open next week for institutional and retail investors.
The Cards subsidiary is expected to raise Rs 10,000 crore from this issue which is priced between Rs 750 – Rs 755 per share. The issue will remain open from March 2-5.
Considering the global peer average price multiple (Industry P/E), including SBI Cards brand value, leadership and earnings growth premium of 61.2 times P/E multiple on FY21E EPS of Rs 12.3, the price is arrived at Rs 775 per share.
SBI Cards is second-largest credit card issuer in India, with an 18% market share.
Credit card industry spends is likely to grow 2.5 times in the next five years.
Credit card spends have registered a robust growth, growing at a CAGR of 32% from fiscal 2015 to fiscal 2019 to reach Rs. 6 trillion as of fiscal 2019, and is expected to grow at a healthy rate to reach Rs. 15 trillion as of fiscal 2024, which is 2.5 times over fiscal 2019.
SBI Cards business looks healthy with the total credit card spends and outstanding growing at a CAGR of 35% and 54% respectively, over the last 2 years till FY19.
Total revenue grew at 46% and net profit at 52% over the same period. ROE (return on equity ) is robust at 31%.
SBI holds 76% in SBI Cards and the remaining stake is held by Carlyle Group. SBI Cards is headquartered in New Delhi and has a presence in 130 cities throughout the country.
The SBI Cards IPO comprises a fresh equity issue worth Rs 500 crore and an offer for sale of up to 130,526,798 equity shares.
This will include up to 37,293,371 share sale by SBI and up to 93,233,427 shares on offer by Carlyle Group.
SBI Cards is one of India’s leading providers of credit cards. Its operating model is focused on catering to what they see as its cardholders’ two main financial needs: transactional needs and short term credit
The revenue they derive from its credit card products consists primarily of interest on their credit card receivables and non-interest income primarily comprised of fee-based income such as interchange fees, late fees, annual credit card membership fees and other fees
SBI Cards is the 2nd largest credit card issuer in India, with 18.1% market share of the Indian credit card market in terms of the number of credit cards outstanding as of November 30, 2019 and 17.9% market share of the Indian credit card market in terms of total credit card spends in the 8 months ended November 30, 2019
The key USP for SBI Cards is that it has a diversified customer acquisition network across multiple channels – 32,677 outsourced sales force operating in 145 Indian cities, presence in 3,190 open market point of sales and access to extensive network of SBI’s vast customer base of 44.55 crore customers
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