SBI Cards IPO opens on March 2. Should you Subscribe?

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The Primary markets seem to be heating up again with SBI Cards coming up with its 10000 Cr IPO on March 2, which makes it one of the biggest IPOs to hit our markets.

Let us find out more about this company and why is everyone so excited to take part in this IPO.

About SBI Cards

According to RBI, SBI Cards is the second-largest credit card issuer in India both in terms of numbers of credit cards outstanding and amounts of credit card spend, with 9.83 million credit cards outstanding as of November 30, 2019, and ₹1,032.65 billion in a total of credit card spend in fiscal 2019.

It commenced operations in 1998 as a joint venture between SBI and GE Capital. It received RBI approval to operate as a non-banking financial institution on October 6, 1998. GE Capital’s ownership stake in SBI Cards was acquired by SBI and CA Rover Holdings in 2017.

Shareholding Pattern

Post the IPO, SBI’s shareholding will drop from 74% to 70% and Carlyle’s will drop from 26% to 16%.

IPO Details

Price Band – Rs 750 to 755
Date – March 2 to March 5, 2020
Lot size – 19 Shares
Amount required at the upper band – Rs 14345
Issue Type – Pure OFS of 9854 Cr + Fresh issue of Rs 500 Cr
Objects of Issue – Offer for sale for exiting investor and fresh issue funds to augment capital base (Capital adequacy ratios).

5 Quick Facts

They deploy a sales force of 32,677 outsourced sales personnel (Dec 2019) operating out of 145 Indian cities. Out of the aforesaid outsourced sales personnel, they have 4,173 outsourced workforces for telesales.

They engage prospective customers through multiple channels, including physical points of sale in bank branches, retail stores, malls, fuel stations, railway stations, airports, corporate parks, and offices, as well as through telesales, online channels, email, SMS marketing, and mobile applications.

They are the leading player in open market customer acquisition in India according to CRISIL Report.

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Presence in 3,190 open market points of sale across India.

Partnership with SBI provides them with access to SBI’s extensive network of 21961 branches across India, which enables marketing credit cards to SBI’s vast customer base of 445.5 million customers as of December 31, 2019.

Management Team

Managing Director and Chief Executive Officer, Mr. Hardayal Prasad, has over 36 years of experience in the financial services industry.



Note: A stands for annualized EPS (9m eps taken and then annualized). PI means post issue. Over here we added IPO proceeds to networth, added new issue shares to total shareholding and calculated BV.

Credit Ratings

rated AAA and A1+ by both CRISIL and ICRA.

Peer Comparison

They have a broad credit card portfolio that includes SBI Card-branded credit cards as well as co-branded credit cards that bear both the SBI Card brand and their co-brand partners’ brands.

A look at its accounts breakup

How does a Credit card transaction work?

A typical credit card transaction begins when a cardholder purchases goods or services from a merchant using the SBI Cards credit card. After the transaction is authorized by the credit card issuer through the payment network, the credit card issuer pays the purchase amount to the payment network net of interchange fees.  The payment network, in turn, then pays the purchase amount to the acquirer. Finally, the acquirer pays the purchase amount to the merchant net of acquirer fees.

Industry and Competition

There are 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 ~72.0% market share by number of outstanding credit cards as of March 2019 and approximately 66.0% market share by credit card spends in the fiscal year 2019.

HDFC Bank is the market leader and has maintained its market share in the number of outstanding credit cards at approximately 27.0% over the years, followed by SBI Card at 18.0%, ICICI Bank at 14.0% and Axis Bank at 13.0%. The market share of SBI Card in terms of total outstanding cards has continuously increased over the years from 15.0% in fiscal 2014 to 18.0% in fiscal 2019.

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SBI Card has the highest market share in terms of incremental cards in force across different time periods with 45.0% market share in the last one month (1M), 27.0% in the past six months (6M) and approximately 23.0% in the past 12 months (12M), 24 months (24M) and 36 months (36M) from July 2019.


With a strong parent (SBI) backing, good financial performance and is the first pure-play card company to get listed on the exchanges, so this IPO is expected to get a lot of subscription and attention. Grey market has also given a 40% premium to this IPO. So, we feel that just for listing gains, one can subscribe to this IPO.

Kush Katakia, founder of Beanstalk Advisory says ” Being the 2nd-largest player in the Indian credit cards market with nearly 18% market share, healthy financial ratios, backed by strong parent company and most importantly the first company to list from the credit card industry would be major rationales behind solid listing gains. To conclude, SBI Cards could well be the Superstar IPO of 2020 but at 19X BV (on the listing) one has to consider the risks. Remember, even the great Bajaj Finance (not strictly comparable) is available at less than 9 times its book value with similar ROCE and ROAs as of SBI Cards. “

Positive Triggers

India’s per capita GDP is expected to grow at a CAGR of 6.0% over the next five years till Rs. 142,000 in fiscal 2024.

According to CRISIL Research, India’s median population age is estimated at 28.4 years in the calendar year 2020. Indonesia and South Africa are the only countries that have the median population age closer to India at 29.5 years and 27.6 years, respectively. Japan had the highest median population age of 48.4 years. With a low median age, India holds the advantage of having an increased working population going forward. This population group is aspirational which will contribute to private consumption and GDP growth rate. The figure below depicts the median age for India as compared to other countries in the calendar year 2020.

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Credit Penetration set to improve as there is huge scope.

Unsecured loans, which comprise of credit cards, personal and consumer durables loans, is a strong growth driver of retail credit. Compared to retail credit, unsecured loans have grown at a faster pace in India at a CAGR of 28.0% to reach approximately 5.0 trillion unsecured loans as of fiscal 2019. For many customers, especially millennials (persons below 30 years of age), unsecured loans would be the first form in which they access to credit.

Discretionary spending set to increase due to more millennial population

Disclosure – Please do not construe this article as a piece of investment advice. It is written simply for educational purposes.


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Aditya Shah

Aditya Shah

Aditya Shah is a SEBI-Registered Investment Advisor. He is the founder of Hercules Advisors that invests for the long term in high quality publicly listed Indian companies at reasonable valuations.
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