Offer at a steep P/E multiple of over 80x leaves little scope for capital appreciation in a turbulent market, though the company’s last three years’ growth trajectory may justify the price band.
|
OFFER AT A GLANCE |
|
|
Name |
SBI Cards and Payment Services Ltd |
|
Public Offer |
Fresh Issue of Rs 500 cr (between 66,22,512 and 66,66,667 shares) and Offer for Sale of 13,05,26,798 shares |
|
Post-IPO Promoter Stake |
About 69.5% |
|
Offer Price |
Rs750-755 (FV 10) |
|
Offer Amount |
Rs 10289.51cr to Rs 10354.77cr |
|
Application Quantity |
19 & Multiples of 19 |
|
Bid/Offer Opens |
March 2, 2020 |
|
Bid/Offer Closes |
March 4, 2020 |
|
Share Allotment |
March 11, 2020 |
|
Refund Process |
March 12, 2020 |
|
Demat Credit |
March 13, 2020 |
|
Share Trading |
March 16,2020 |
|
Listing at |
BSE &NSE |
|
IPO Rating |
Nil |
|
Book Running Lead Managers |
Kotak Mahindra Cap, Axis Cap, BofA Sec, HSBC Sec, Nomura Financial and SBI Cap |
|
Registrars |
Link Intime |
The Offer
The present issue consists of an offer for sale of 13.05 crore shares Rs 10 each (3.73 crore shares from promoter, SBI, and 9.32 crore shares from CA Rover Holdings – an affiliate of the global investment firm Carlyle Group) and a fresh issue of 66.22 lakh to 66.67 lakh shares (Rs 500 cr) which constitutes less than 15% of the post-IPO capital of Rs 939 cr. Having a price band Rs 750-755 a share, the offer is valued between Rs 10290 cr and Rs 10355 cr.
Of the IPO, up to 18,64,669 shares have been reserved for the company’s employees and up to 1,30,52,680 shares have been reserved for the shareholders of SBI. The employees’ reserve portion is being offered at a discount of Rs 75 per share. Applicants should bid for a minimum quantity of 19 shares (Rs 14,250).The entire non-IPO equity (382.51 lakh shares) is under lock-in for a period of one year from the date of allotment.
Background
The object of the present fresh issue is to augment the company’s capital base to facilitate its business growth and to ensure compliance with the RBI directions. The 1998-registered SBI Card is a Non-Banking Financial Company – Systemically Important Non-Deposit taking company (“NBFC-NDSI”) registered with the RBI. It offers an extensive credit card portfolio to individual cardholders and corporate clients which includes lifestyle, rewards, travel and fuel, shopping, banking partnership cards and corporate cards covering all major cardholder segments in terms of income profiles and lifestyles.
There are reportedly a total of 74 players offering credit cards in India, with the top three private banks (HDFC Bank, Axis Bank and ICICI Bank) and SBI Card, as the leading pure-play credit card issuer, dominating the credit card business with a total of approximately 72% market share by number of outstanding credit cards as of March 2019 and approximately 66% market share by credit card spends in fiscal year 2019.
HDFC Bank is the market leader and has maintained its market share in the number of outstanding credit cards at approximately 27% over the years, followed by SBI Card at 18%, ICICI Bank at 14% and Axis Bank at 13%. The market share of SBI Card in terms of total outstanding cards has continuously increased over the years from 15% in fiscal 2014 to 18% in fiscal 2019.
On the financial front too SBI Card has consistently put up an impressive show in recent years. The company’s topline has more than doubled during the last three years and net profit has leapt nearly two and a half times. Though already having a large equity base of Rs 932 cr, the company’s EPS at the end of December 2019 worked out to Rs 16.66 on an annualized basis.
Financial Track (Amount in Cr.)
|
PERIOD ENDED |
12/31/2019 |
9/30/2019 |
3/31/2019 |
12/31/2018 |
9/30/2018 |
3/31/2018 |
3/31/2017 |
|
MONTHS |
9 |
6 |
12 |
9 |
6 |
12 |
12 |
|
REVENUE |
6843.06 |
4363.94 |
6999.11 |
5083.92 |
3215.67 |
5186.98 |
3346.20 |
|
NET PROFIT |
1165.01 |
729.69 |
869.87 |
620.63 |
376.61 |
581.94 |
368.75 |
|
EQUITY |
932.33 |
932.33 |
837.22 |
837.22 |
837.22 |
785.00 |
785.00 |
|
RESERVES |
3818.98 |
3377.57 |
2744.50 |
2584.68 |
2360.26 |
1568.06 |
663.82 |
|
EPS (p.a.) Rs |
16.66 |
15.65 |
10.39 |
9.88 |
9.00 |
7.41 |
4.70 |
|
BOOK VALUE |
50.96 |
46.23 |
42.78 |
40.87 |
38.19 |
29.98 |
18.46 |
Valuation
For the last full year (FY19) SBI Card posted a bottom line of Rs 870 cr which yields an EPS of 9.43 on the pre-IPO capital base of 932 cr. The upper price band (Rs 755) discounts this as high as 80 times which may prove to be indefensible if the secondary markets were to face some correction due to various factors.
The parent company, SBI, which will continue to hold more than 69% of SBI Card’s equity, is currently priced only about 26 times its earnings. Credit Card industry leader, HDFC Bank, too is discounted around 25x. Considering these, SBI Card’s pricing may look steep. Nevertheless, if the company’s performance in recent years is any indication, the historical P/E of 80x may significantly drop after the FY20 results as the company is expected to post hefty growth in earnings for the year ending March 2020.
(Amount in Cr)
|
SCRIP NAME |
REVENUE |
NET PROFIT |
EQUITY |
EPS |
P/E |
CMP |
|
SBI |
359792.84 |
11136.76 |
892.46 |
12.48 |
25.8 |
321.95 |
|
SBI Life |
1616.95 |
1349.18 |
1000.00 |
13.49 |
67.1 |
905.70 |
|
SBI Cards (A) |
6999.11 |
869.87 |
932.33 |
9.43 |
80.1 |
755.00 |
|
SBI Cards (E) |
9420.94 |
1630.23 |
938.96 |
17.36 |
43.5 |
755.00 |
|
HDFC Bank |
142041.59 |
26274.55 |
558.12 |
47.08 |
25.5 |
1199.35 |
|
(A)-Actual for 2018-19; (E)- Estimate based on first 9-months working of FY20 |
Concern
SBI Card’s stablemate, SBI Life, floated its IPO in September 2017 at a price of Rs 700 a share. This stock hit a bottom of Rs 487 after a year, in October 2018. However, the price recouped to Rs 1030 by October 2019. Should there be a reverse swing in the market mood in the coming days due to factors like Coronavirus, political unrest, etc., which are beyond the control of the company, SBI Card too may face the same fate of SBI Life post-listing.
Lead Manager’s Track
There are six investment bankers viz. Kotak Mahindra, Axis Capital, BofA Securities (DSP Merrill Lynch), HSBC Securities, Nomura Financial and SBI Capital Markets involved in managing the Rs 10,300 cr plus IPO of SBI Card.
As regards the managers’ track record, in last three years Kotak handled 20 IPOs mopping up nearly 54000 cr. Overall, this has appreciated around 14%. Of the 20 IPOs eleven are currently quoting at a premium. Whereas three IPOs fetched more than 100% return (Avenue Super being the highest at 673%, five IPOs have inflicted a loss of more than 50%, CL Educate being the biggest loser (-88%).
Kotak Mahindra Managed IPOs (Amount in Cr)
|
ISSUER NAME |
IPO DATE |
IPO VALUE |
CUR. MKT |
GAIN/LOSS |
% |
|
Ujjivan Small |
12/2/2019 |
750.00 |
982.09 |
232.09 |
30.9 |
|
Polycab India |
4/5/2019 |
1346.19 |
2663.72 |
1317.54 |
97.9 |
|
Metropolis Heal |
4/3/2019 |
1204.29 |
2547.69 |
1343.40 |
111.6 |
|
Creditaccess |
8/8/2018 |
1131.19 |
2257.82 |
1126.63 |
99.6 |
|
HDFC AsstMgnt |
7/25/2018 |
2800.33 |
7996.09 |
5195.76 |
185.5 |
|
TCNS Clothing |
7/18/2018 |
1125.13 |
929.88 |
-195.25 |
-17.4 |
|
Varroc Engg |
6/26/2018 |
1955.44 |
760.94 |
-1194.50 |
-61.1 |
|
IndoStar Cap |
5/9/2018 |
1844.00 |
898.63 |
-945.37 |
-51.3 |
|
Lemon Tree |
3/26/2018 |
1038.68 |
942.24 |
-96.45 |
-9.3 |
|
Bandhan Bank |
3/15/2018 |
4473.02 |
4557.71 |
84.69 |
1.9 |
|
Aster DM Health |
2/12/2018 |
980.14 |
834.92 |
-145.21 |
-14.8 |
|
New India Assur |
11/1/2017 |
9600.00 |
2629.20 |
-6970.80 |
-72.6 |
|
Mahindra Logis |
10/31/2017 |
829.36 |
721.68 |
-107.68 |
-13.0 |
|
GIC |
10/11/2017 |
11372.64 |
4077.69 |
-7294.95 |
-64.1 |
|
IndEnerExch |
10/9/2017 |
1000.73 |
1061.68 |
60.95 |
6.1 |
|
Godrej Agrovet |
10/4/2017 |
1157.31 |
1169.14 |
11.82 |
1.0 |
|
SBI Life Ins |
9/20/2017 |
8400.00 |
10674.00 |
2274.00 |
27.1 |
|
Sec Intel Serv |
7/31/2017 |
779.58 |
1053.63 |
274.05 |
35.2 |
|
CL Educate |
3/20/2017 |
238.95 |
28.16 |
-210.80 |
-88.2 |
|
Avenue Super |
3/8/2017 |
1870.00 |
14454.97 |
12584.97 |
673.0 |
|
|
|
53896.98 |
61241.88 |
7344.89 |
13.6 |
Axis Capital handled as many as 28 IPOs aggregating to Rs 63500-odd cr in last three years which have given an overall return of just under 3%. As many as 15 IPOs are currently quoting below the offer price today. Investors have lost more than 50% in 6 IPOs, Tejas Network and S Chand Co being the worst at 82% and 89% respectively.
Axis Capital Managed IPOs
|
ISSUER NAME |
IPO DATE |
IPO VALUE |
CURRENT |
GAIN/LOSS |
% |
|
CSB Bank |
22-Nov-19 |
409.68 |
362.20 |
-47.48 |
-11.6 |
|
Sterl Wil Solar |
6-Aug-19 |
2880.94 |
614.60 |
-2266.34 |
-78.7 |
|
SpandanaSphoor |
5-Aug-19 |
1200.94 |
1544.87 |
343.94 |
28.6 |
|
Polycab India |
5-Apr-19 |
1346.19 |
2663.72 |
1317.54 |
97.9 |
|
Chalet Hotel |
29-Jan-19 |
1641.18 |
1928.09 |
286.91 |
17.5 |
|
IrconInternl |
17-Sep-18 |
470.49 |
497.98 |
27.49 |
5.8 |
|
HDFC AsstMgnt |
25-Jul-18 |
2800.33 |
7996.09 |
5195.76 |
185.5 |
|
Sandhar Tech |
19-Mar-18 |
512.48 |
372.47 |
-140.01 |
-27.3 |
|
Hindustan Aero |
16-Mar-18 |
4229.33 |
2334.83 |
-1894.50 |
-44.8 |
|
Bandhan Bank |
15-Mar-18 |
4473.02 |
4557.71 |
84.69 |
1.9 |
|
Aster DM Health |
12-Feb-18 |
980.14 |
834.92 |
-145.21 |
-14.8 |
|
Khadim India |
2-Nov-17 |
543.06 |
75.92 |
-467.14 |
-86 |
|
New India Assur |
1-Nov-17 |
9600.00 |
2629.20 |
-6970.80 |
-72.6 |
|
Mahindra Logis |
31-Oct-17 |
829.36 |
721.68 |
-107.68 |
-13 |
|
Rel Nip LifAst |
25-Oct-17 |
1542.24 |
2393.23 |
850.99 |
55.2 |
|
GIC |
11-Oct-17 |
11372.64 |
4077.69 |
-7294.95 |
-64.1 |
|
IndEnerExch |
9-Oct-17 |
1000.73 |
1061.68 |
60.95 |
6.1 |
|
Godrej Agrovet |
4-Oct-17 |
1157.31 |
1169.14 |
11.82 |
1 |
|
SBI Life Ins |
20-Sep-17 |
8400.00 |
10674.00 |
2274.00 |
27.1 |
|
Capacit’e Infra |
13-Sep-17 |
400.00 |
256.56 |
-143.44 |
-35.9 |
|
Matrimony.com |
11-Sep-17 |
502.53 |
211.21 |
-291.31 |
-58 |
|
Quess Corp |
14-Aug-17 |
873.92 |
560.29 |
-313.63 |
-35.9 |
|
Sec Intel Serv |
31-Jul-17 |
779.58 |
1053.63 |
274.05 |
35.2 |
|
CDSL |
19-Jun-17 |
523.99 |
931.93 |
407.94 |
77.9 |
|
Eris Lifescienc |
16-Jun-17 |
1741.16 |
1252.02 |
-489.14 |
-28.1 |
|
Tejas Network |
14-Jun-17 |
776.69 |
140.38 |
-636.31 |
-81.9 |
|
S Chand Co |
26-Apr-17 |
728.56 |
78.02 |
-650.54 |
-89.3 |
|
Avenue Super |
8-Mar-17 |
1870.00 |
14454.97 |
12584.97 |
673 |
|
|
|
63586.49 |
65449.03 |
1862.57 |
2.9 |
Bank of America affiliate DSP Merrill Lynch, though handled just three IPOs in last three years, has helped investors to make an overall return of 82%. While HDFC fetched more than 185% return, ICICI Lombard yielded 87%. Nevertheless, stablemate ICICI Securities inflicted a loss of 8.4%.
B of A Securities (DSP Merrill Lynch) Managed IPOs
|
ISSUER NAME |
IPO DATE |
IPO VALUE |
CUR. |
GAIN/LOSS |
% |
|
HDFC Asst Mgnt |
7/25/2018 |
2800.33 |
7996.09 |
5195.76 |
185.5 |
|
ICICI Securities |
3/22/2018 |
3514.85 |
3218.45 |
-296.40 |
-8.4 |
|
ICICI Lombard |
9/15/2017 |
5700.94 |
10640.32 |
4939.38 |
86.6 |
|
|
|
12016.12 |
21854.86 |
9838.74 |
81.9 |
Another foreign-controlled investment banker, HSBC Securities, was involved in just one IPO in three years, which is currently languishing 64% below the offer price even after two years.
HSBC Securities Managed IPOs
|
ISSUER NAME |
IPO DATE |
IPO VALUE |
CUR. |
GAIN/LOSS |
% |
|
GIC |
10/11/2017 |
11372.64 |
4077.69 |
-7294.95 |
-64.1 |
Nomura Financial played a lead manager role in ten IPOs which collectively raised Rs 28115 cr. This has fetched an overall return of around 19% for the investors. However, half of the issues are currently quoted at a discount. In fact, three IPOs are traded at more than 50%!
Nomura Financial Managed IPOs
|
ISSUER NAME |
IPO DATE |
IPO VALUE |
CUR. |
GAIN/LOSS |
% |
|
Affle |
7/29/2019 |
459.00 |
1105.67 |
646.67 |
140.9 |
|
HDFC AsstMgnt |
7/25/2018 |
2800.33 |
7996.09 |
5195.76 |
185.5 |
|
IndoStar Cap |
5/9/2018 |
1844.00 |
898.63 |
-945.37 |
-51.3 |
|
Future Supply |
12/6/2017 |
649.70 |
388.74 |
-260.95 |
-40.2 |
|
HDFC Life Insur |
11/7/2017 |
8695.01 |
16310.63 |
7615.63 |
87.6 |
|
New India Assur |
11/1/2017 |
9600.00 |
2629.20 |
-6970.80 |
-72.6 |
|
Rel Nip LifAst |
10/25/2017 |
1542.24 |
2393.23 |
850.99 |
55.2 |
|
CDSL |
6/19/2017 |
523.99 |
931.93 |
407.94 |
77.9 |
|
Tejas Network |
6/14/2017 |
776.69 |
140.38 |
-636.31 |
-81.9 |
|
HUDCO |
5/8/2017 |
1224.35 |
606.05 |
-618.30 |
-50.5 |
|
|
|
28115.31 |
33400.55 |
5285.26 |
18.8 |
The issuer’s stablemate, SBI Capital Markets, participated in 17 IPOs during last three years tapping nearly Rs 30,500 cr which have brought a return of about 50% thanks to Avenue Super Markets and IRCTC which fetched a fabulous gain of 673% and 445% respectively. Seven issues are currently quoted below the offer price, worst performer being Shapoorji group company Sterling & Wilson Solar (-78%).
SBI Capital Managed IPOs
|
ISSUER NAME |
IPO DATE |
IPO VALUE |
CUR. |
GAIN/LOSS |
% |
|
IRCTC |
9/30/2019 |
645.12 |
3517.21 |
2872.09 |
445.2 |
|
Sterl Wil Solar |
8/6/2019 |
2880.94 |
614.6 |
-2266.34 |
-78.7 |
|
IrconInternl |
9/17/2018 |
470.49 |
497.98 |
27.49 |
5.8 |
|
Rites |
6/20/2018 |
466.2 |
922.01 |
455.81 |
97.8 |
|
ICICI Secur |
3/22/2018 |
3514.85 |
3218.45 |
-296.4 |
-8.4 |
|
Mishra Dhatu |
3/21/2018 |
438.38 |
1197.25 |
758.88 |
173.1 |
|
Hindustan Aero |
3/16/2018 |
4229.33 |
2334.83 |
-1894.5 |
-44.8 |
|
Bharat Dyna |
3/13/2018 |
960.94 |
615.97 |
-344.97 |
-35.9 |
|
HG Infra Engg |
2/26/2018 |
462 |
412.21 |
-49.79 |
-10.8 |
|
Amber Enter |
1/17/2018 |
600 |
958.78 |
358.78 |
59.8 |
|
Rel Nip LifAst |
10/25/2017 |
1542.24 |
2393.23 |
850.99 |
55.2 |
|
SBI Life Ins |
9/20/2017 |
8400 |
10674 |
2274 |
27.1 |
|
Cochin Ship |
8/1/2017 |
1468.11 |
1155.46 |
-312.65 |
-21.3 |
|
Sec Intel Serv |
7/31/2017 |
779.58 |
1053.63 |
274.05 |
35.2 |
|
CDSL |
6/19/2017 |
523.99 |
931.93 |
407.94 |
77.9 |
|
HUDCO |
5/8/2017 |
1224.35 |
606.05 |
-618.3 |
-50.5 |
|
Avenue Super |
3/8/2017 |
1870 |
14454.97 |
12584.97 |
673 |
|
|
|
30476.52 |
45558.56 |
15082.05 |
49.5 |