SBI Cards IPO Review

SBI Cards IPO, the much awaited initial public offering will open on March 2, 2020. The SBI Cards IPO (SBI Cards and Payment Services IPO), a subsidiary of State Bank of India, will be a mix of fresh issue and an offer for sale (OFS). The net proceeds of the SBI cards Fresh Issue, i.e. Gross proceeds of the Fresh Issue less the Offer Expenses apportioned to the Company (“Net Proceeds”) are proposed to be utilized for augmenting the capital base to meet the future capital requirements. SBI Cards and Payment Services IPO intends to raise around Rs 10,000 crore in which US private equity firm ‘Carlyle’ and State Bank of India (SBI) will make partial exits from SBI Cards and Payment Services Ltd.

SBI Card IPO Details

Issue opens Monday, 2nd March, 2020*
Issue Closes (QIB)Wednesday, 4th March, 2020
Issue Closes (Others)Thursday, 5th March, 2020
Ancho Bidding28th February, 2020
Issue Size (shrs)Fresh Issue pto ₹ 500 Cr
 + Offer for Sale of upto 130,526,798 Equity Shares
Issue Size (₹  Cr)Rs. 10,340.79 Cr]
Price Band₹ 750 – 755
Bid Lot19 Equity Shares 
Reservation for: 
·         Employee of SBI Cards and SBI1,864,669 Equity Shares-  126.80 Cr
·        SBI Shareholders13,052,680 Equity Shares- 985.48 Cr
Discount for Employee ₹ 75/- per Equity Share
Issue Structure : 
QIB50% of the Net offer
NIB15% of the Net offer -18,334,795 Shares- ₹  1,384.28 Cr)
Retail35% of the Net offe- 42,781,188 Shares – ₹ 3,229.98 Cr)
Appls Retail 1x2251641
Appls SBI quota 1x686983
BRLMsAxis Capital, Kotak Mahindra Capital, DSP ML, HSBC Securities, Nomura Financial, SBI Capital Markets
RegistrarLink Intime India Pvt. Ltd.


  • SBI Cards IPO Final day subscription: overall 26.54x , Retail 2.50x, Shr Holders 26.54x , HNI 45.23x, QIB 57.18x

About SBI Cards

  • SBI Cards and Payment Services Limited (“SBI Cards”) was incorporated on May 15, 1998. SBI Cards is engaged in the business of issuing credit cards to consumers in India. The Promoter of the company is State Bank of India (“SBI”), who holds 74% of the pre-issue share capital of the company.
  • There are 74 players in India’s creditr card market and the industry is highly concentrated, with top 4 players accounting for 72% of cards and 66% of spends.
  • SBI Cards is India’s second largest and the largest pure-play credit card company, with 10 million credit cards outstanding commanding 18.1% market share in terms of cards outstanding and 17.9% share in terms of card spends.
  • SBI cards offers extensive credit card portfolio to individual cardholders and corporate clients. This includes lifestyle, rewards, travel and fuel, shopping, banking partnership cards and corporate cards covering all major cardholder segments in terms of income profiles and lifestyle.
  • While SBI holds 74% of the share capital pre IPO, Carlyle Group had picked up 26% stake in SBI Cards from GE Capital in 2017.

SBI Cards: Financials

Revenue from Operations6,843.065,083.926,999.115,186.983,346.20
Revenue Growth (%)34.60%34.94%55.01%
EBITDA as stated2,659.081,748.182,429.911,655.351,104.85
EBITDA (%)38.86%34.39%34.72%31.91%33.02%
Profit Before Tax1,618.67947.511,331.60919.34571.62
Net Profit for the year1,161.21614.52862.72601.14372.86
Net Profit Margin16.97%12.09%12.33%11.59%11.14%
Equity Share Capital932.33837.22837.22785785
Reserves as stated~3,818.982,584.682,744.501,568.06663.82
Net worth as stated4,822.823,493.413,653.242,424.581,448.82
EPS (Rs.)12.456.769.437.44.75
RoNW (%)24.00%18.00%24.00%25.00%26.00%
Net Asset Value (Rs.)51.7338.4239.9329.8318.46
ROAA (avg assets)6.70%4.70%4.80%4.50%4.00%
ROAE (av equity)36.50%27.70%28.40%31.00%28.50%
IPO Price755    
Post issue Equity938.94
EPS (Rs.) annualized16.49

SBI Cards IPO: Salient Points

  • It is a subsidiary of SBI, country’s largest commercial bank in terms of deposits, advances and number of branches.
  • It has a large credit card portfolio that includes SBI Card-branded credit cards as well as other co-branded credit cards.
  • SBI cards offers 4 SBI Card branded credit cards: SimplySave, SimplyClick, Prime and Elite.
  • SBI cards is the largest co-brand credit card issuer in India according to the CRISIL Report, and has partnered with several major players in the travel, fuel, fashion, healthcare and mobie like Airr India, Apollo Hospitals, BPCL, Fbb, IRCTC, OLA Money,Yatra etc.
  • SBI Cards has two primary revenue streams, split evenly between
    • The interest income on revolving credit/EMI
    • Fees income spend based or events like cash withdrawal, late payment, over limit etc.
  • For the fiscals 2017 , 2018 and 2019:
    • SBI Card revenue from operations recored a CAGR of 44.6%
    • The profit before tax a CAGR of 52.6%.
    • Net Profit a CAGR of 52.1%

SBI Cards IPO: Assessment

  • There are 74 credit card issuers in India, including the top-three Indian private banks (HDFC Bank, Axis Bank and ICICI Bank) and SBI Card – the leading pure-play credit card issuer – according to CRISIL Report.
  • Credit card spends have registered robust growth, growing at a CAGR of 32.0% from fiscal 2015 to fiscal 2019, and growth is expected to continue to reach ₹ 15.0 trillion in total credit card spends for fiscal 2024, according to CRISIL Report.
  • The Government’s focus on a cash-less society, digitalization, developments in e-commerce, and growth in POS infrastructure have encouraged the use of credit cards.
  • The interest that SBI Cards IPO earns on revolving and term credit card balances make 51.0% and 51.1% of SBI cards total revenue from operations in the nine months ended December 31, 2019 and fiscal 2019 respectively.
  • Indian regulations do not currently impose any limit on the interest rate charged to cardholders. However, these regulations could change, and our credit card receivables portfolio could be subject to interest rate caps in the future.
  • SBI Cards AAA credit rating has helped it to keep cost of borrowing within 8%.
  • Present card penetration is quite low in India and the scope is considered good with a relatively young population.
  • Further spread of Covid19 or Corona Virus represents the biggest threat to investors with respect to their listing gains.
  • SBI cards IPO looks attractive not only due to the overall good prospects but also due to reach of SBI Bank especially in semi-urban areas. This gives the company us, highway to growth is long, with company’s a distribution edge in an under penetrated industry.
  • There are no listed companies in India that engage in a business similar as SBI cards.
  • The issue for QIBs closes a day earlier.
  • It seems there is proportionate allotment in shareholder quota and so everyone may not be assured an allotment.
  • SBI Cards IPO as on 28-02-19 is quoting at a Kostak of Rs. 2800/- and a GMP of Rs. 280 which is about 25% below the ruling premium a day earlier. This is on account of market fall due to virus fears.
  • I intend to apply both in shareholders quota as well as in retail quota in SBI Cards IPO.

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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