SBI Cards IPO
Issue opens on 2. March'20
Issue Closes on 5. March'20
Price Band Rs 750 - 755
IPO size Rs 10289.5 Cr— 10354 Cr
Offer for sale 9789.5 Cr to Rs 9854.8 Cr
Expected MCAP: Rs 69955.6 to Rs 72769.2
Equity Dilution at 0.7% (Mainly an OFS) - Read this What is OFS ?
Valuation: 9MFY20 EPS annualized,
20 P/E at 45.5x & 45.8x lower & upper band respectively
So, what does it means for SBI?
SBI will sell 3.73cr shares or 4% in the co.
SBI will get Rch2815.7 cr., from the IPO
This would strengthen their Tier I ratio by 15bps (Q3FY20 RWA taken)
Post stake sale; SBI will hold 69.5. stake in the co.
Giving it a 20% holding discount rate; the holding will work out to Rs 44.2 per share in SOTP (Taking SBI's card price of .755 per share)
SWOT analysis
Strength
Issue opens on 2. March'20
Issue Closes on 5. March'20
Price Band Rs 750 - 755
IPO size Rs 10289.5 Cr— 10354 Cr
Offer for sale 9789.5 Cr to Rs 9854.8 Cr
Expected MCAP: Rs 69955.6 to Rs 72769.2
Equity Dilution at 0.7% (Mainly an OFS) - Read this What is OFS ?
Valuation: 9MFY20 EPS annualized,
20 P/E at 45.5x & 45.8x lower & upper band respectively
So, what does it means for SBI?
SBI will sell 3.73cr shares or 4% in the co.
SBI will get Rch2815.7 cr., from the IPO
This would strengthen their Tier I ratio by 15bps (Q3FY20 RWA taken)
Post stake sale; SBI will hold 69.5. stake in the co.
Giving it a 20% holding discount rate; the holding will work out to Rs 44.2 per share in SOTP (Taking SBI's card price of .755 per share)
SWOT analysis
Strength
- Growth of the business has been strong
- 2nd largest in terms of market share (not easy to get market share where top 4 are 60% of market)
- Co-branding is a great strength which attracts customers
- 95-97% of cards are charged fees unlike peers which gives some of the cards for free
- Diversified custorner acquisition & credit card offerings
- Over dependence on SBI
- large ticket sized NPAs do not lead to recovery
- 100% unsecured lending; therefore no collateral
- YONO is a great digital penetration for the co.
- India is under-penetrated in terms of credit card mid
- customer base provide growth opportunity to the co.
- Focus on Tier II, Tier III & smaller cities ahead Govt's focus on digital transactions
- MDR (Merchant discount rate) is a big threat to the co ; any regulatory changes in MDR can disrupt the entire business model of SBI cards
- Corporate NPAs In a slowdown economy
- Vulnerable to risks arising from failure of adequate adhering by employees
- Provision for NPAs may be lower than receivables
- Competition from bank, NBFCs & payment banks