SBI Cards drops 10% on debut, HNIS lose ~200 per share

Shares of SBI Cards and Payment Services closed 10 per cent below their issue price, with the secondary market crash taking a toll on investor sentiment. Shares of the country’s biggest pure-play credit card company ended at ~678, down ~77, or 10.2 per cent, over the IPO price of ~755.

The weak trading debut contrasted the stellar demand seen during SBI Cards’ ~10,300-crore IPO earlier this month. The share sale was subscribed 26 times, generating bids worth a record ~2 trillion, underpinned by the expectations of a surge on the listing day.

The coronavirus scare was prevalent at the time of SBI Cards’ IPO. However, the situation worsened in the past week. Since March

5, the closing date of the SBI Cards issue, the benchmark Sensex has come off 18 per cent.

At the time of the IPO, many

investors were expecting SBI Cards to list at a premium of more than 30 per cent. The weak listing has hurt several high net-worth individuals (HNIS), who had borrowed money to subscribe to its shares.

Investment bankers say HNIS have suffered a loss of ~200 per share as their acquisition cost after factoring in the interest shares worked out to ~870. They had placed cumulative bids worth ~80,000 crore in the IPO.

The stock touched a high of ~755 and a low of ~656 on the National Stock Exchange (NSE), with shares worth ~4,320 crore changing hands. Another ~300 crore worth of shares were traded on the BSE.

The weak debut notwithstanding, many analysts are bullish on the prospects of YES Bank. Macquarie, for stance, has initiated an ‘outperform’ on the stock with a target price of ~1,025.

“SBI Cards is a pure play on quintessential India opportunities -- discretionary, consumption, retail credit penetration, and digital payments. We believe SBI Cards strong parentage, market leadership, brand, and smart strategies will enable it to capture a rising share of India’s fast-growing credit card industry…we believe being India’s only notable standalone credit card company and having growth visibility should ensure premium valuations can be sustained,” the brokerage said in a note.

In the past few years, SBI Cards has clocked strong growth.

“The company has maintained a strong earnings trajectory, with revenue rising at a CAGR of 44.6 per cent to ~6,999 crore in 2017, and a net profit trajectory of 52.1 per cent CAGR to ~862.7 crore in 2019, with sustainable ROA above 4 per cent and ROE at more than 28 per cent,” says a note by ICICI DIRECT.