SBI Cards makes tepid market debut amid worries on outbreak

MUMBAI: SBI Cards and Payment Services Ltd made a weak debut on Monday as uncertainties over the Covid-19 pandemic caused a sharp sell-off in domestic equity markets. Shares of the unit of State Bank of India (SBI), the country’s top lender, closed at ₹683.20 on BSE, down 9.5% from its issue price of ₹755 a piece. The stock opened at ₹658, down 12.8% from its issue price.

This was the first stock market listing in India this calendar year. The weak market sentiment has, however, kept unchanged analysts confidence on the stock.

Macquarie Research has initiated coverage on the stock with an outperform rating and a target price of ₹1,025, indicating a 36% potential upside, stating that

India’s only notable standalone credit card company and having growth visibility should ensure premium valuations can be sustained.

“We believe SBI Cards can deliver a 32% earnings per share (EPS) compounded annual growth rate (CAGR) with an average return on equity (ROE) of 28% over FY20-23, driven primarily by over 25% growth in cards outstanding,” the foreign brokerage firm said in a note on Monday.

SBI Cards’ initial public offering (IPO) was open for subscription between 2-5 March with a price band of ₹750-755.

The issue was subscribed 26 times. The qualified institutional buyers’ (QIB) portion got subscribed 57.2 times, while non-institutional investors’ category was subscribed 45.2 times.

Retail and employee categories were subscribed 2.5 times and 4.7 times respectively. SBI Cards raised ₹10,340 crore through the public issue.

The company is the secondlargest credit card issuer in India with 9.32 million outstanding credit cards and ₹98,486 crore in total credit card spends as on December 2019, achieving a market share of 18.1% and 17.9% respectively.

Diversified customer acquisition network and large product suite comprising the largest number of co-branding partnerships enable better customer engagement across multiple channels.

SBI Cards has maintained a strong earnings trajectory, with revenue growth of 44.6% compound annual growth rate (CAGR) at ₹6,999 crore in 2017 and net profit trajectory at 52.1% CAGR to ₹862.7 crore in 2019.