Intending to raise Rs 9000 crore, the credit card unit of India’s largest lender SBI, SBI card and Payment Services will open IPO on March 2 and is likely to be one of the superstars IPO of 2020. According to the RBI, the State Bank of India’s credit card unit is one of the dominant players and is second largest credit card issuer with 18 per cent market share in India both in terms of numbers of credit cards outstanding and amounts of credit card spends, with 9.83 million credit cards outstanding as of November 30, 2019 and 1,032.65 billion in total of credit card spends in fiscal 2019.
The SBI Cards IPO comprises a fresh equity issue worth Rs 500 crore and an offer for sale of up to 130,526,798 equity shares. This will include up to 37,293, 371share sale by SBI and up to 93,233,427 shares on offer by Carlyle Group. And the SBI price band is likely to be in the band of Rs 700-755.
Bids can be made for a minimum of 19 Equity Shares and in multiples of 19 Equity Shares thereafter. The Bid or Offer will close on March 5, 2020.
SBI holds 76 per cent stake in SBI Cards and Carlyle Group holds the rest of the stake. While Carlyle is looking to sell a 10 per cent stake in the company via IPO and SBI card would be selling 4 per cent.
The magnitude of this IPO can be gauged as this is going to be the fifth-largest IPO in the country after Coal India, Reliance Power, GIC Re and Oil and Natural Gas Corp (ONGC) and will help the SBI to raise funds to boost credit growth. For FY19 to FY20, it is likely to be the largest IPO.
The SBI cards were launched in October 1998 by State Bank and GE Capital. In December 2017, State Bank of India and The Carlyle Group acquired GE Capital`s stake in the Company. The customer base of SBI cards is over 9 million and SBI cards have its presence in more than 130 cities in India.
For the six months to last September, SBI Cards reported revenue growth of 36 per cent to Rs 4,363.9 crore from a year-ago. Its profit jumped 78 per cent to Rs 1,034.58 crore during the period. SBI Cards have established a proven track record of consistently generating profits over the past three fiscal years. Their total income increased from 34,710.38 million in fiscal 2017 to 72,868.35 million in fiscal 2019 at a CAGR of 44.9 per cent and our revenues from operations have increased from Rs 33,462.03 million in fiscal 2017 to Rs 69,991.11 million in fiscal 2019 at a CAGR of 44.6 per cent. Our net profit increased from Rs 3,728. 61 million in fiscal 2017 to Rs 8,627. 22 million in fiscal 2019 at a CAGR of 52.1 per cent .
India’s credit card market has huge potential, as the market remains largely underpenetrated. According to the CRISIL Report, in calendar year 2017, the average number of credit cards outstanding per 100 persons in India was 2.2 as compared to 320.0 in the United States, 42.0 in China and 73.0 in Brazil. The credit cards spend as a percentage of GDP stood at 3.0 per cent as compared to 17.0 per cent in the United States, 25.0 per cent in Hong Kong and 12.0 per cent in Brazil. India still has one of the highest levels of youth demographics with a median age of 26.8 as of fiscal 2015.