The initial public offer (IPO) of SBI Cards & Payments Services, India’s second largest credit card issuer, will open on March 2. The price band, according to reports, of the offer has been set at Rs 750-755 per equity share. The offer comprises a fresh issue worth Rs 500 crore and an offer for sale (OFS) of up to 130,526,798 equity shares. The bid lot for the offer has been finalised to be 19 equity shares and in multiples of 19 equity shares thereafter.
Here’re the details and offer break-up you need to know:
1) Existing shareholders of SBI: Of the entire issue, up to 13,052,680 equity shares or 9.5 per cent of the issue has been reserved for existing shareholders in State Bank of India (SBI). Simply put, investors who have SBI shares in their portfolio as on February 18, 2020 – the record date for application under this criterion – can apply for the IPO under this category. There is no binding limit on how many shares you hold. Hence, even if you have one share of the promoter company, you can apply for the issue under this category.
2) Retail quota: For those who do not have SBI shares in their portfolio and missed buying ahead of the cut-off date, they can apply under the ‘Retail’ category. According to Axis Securities (Axis Capital is one of the book running lead managers to the SBI Cards issue), around 35 per cent of the issue has been reserved for small / retail investors. Anyone can apply in the Retail category, provided the investment limit is up to Rs 2 lakh. SBI shareholders (bidding up to Rs 2 lakhs) can also apply under the retail category, the Red Herring Prospectus (RHP) says. Those who hold SBI shares can apply above Rs 2 lakh and maximum up to reserved portion for the shareholders category.
3) Employee quota: Existing employees of SBI are the luckiest lot. If an SBI shareholder is also employed at SBI, s/he is also eligible to apply in all the three categories depending upon the investable surplus – retail individual investor, or RII, (up to Rs 2 lakh), SBI shareholder (up to Rs 2 lakh) and employee quota (up to Rs 5 lakh). Additionally, employees of SBI will be offered a discount of Rs 75, according to an exchange filing by SBI.
Further, 50 per cent of the issue has been reserved for QIBs (Qualified Institutional Buyers), and 15 per cent for Non- Institutional Bidders (NIBs).
Extended window for application
The issue will be open for 4 days. Normally, IPOs are open for subscription for three days but SBI Cards IPO will run for four days. The first three days, i.e. from March 2 to March 4, the issue will be open for all bidders – QIBs, NIBs, and Retail investors (including SBI shareholders and employees). However, the fourth day – i.e. March 5 – will be exclusively for Retail investors only. For QIBs, the offer will close on March 4.
Bumper response expected
Analysts expect the public offer to garner a good response from all categories, especially the retail segment. Since the IPO is coming from a worthy parent – SBI – the demand is likely to get amplified, they say.
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“This is a new kind of business which is not listed in India. It is more of a financial entity and given the kind of craze around it, it will get a good response. However, the valuation is a bit discomforting. Since it’s a good brand, pricing doesn’t matter, it will get oversubscribed. But people need to be careful because normally, after listing with steep gains, the stock doesn’t give normal returns,” said AK Prabhakar, head of research at IDBI Capital.
Ambareesh Baliga, an independent market expert also expects the IPO to get a good response. “The mood for the entire primary market has improved, thanks to some of the previous issues such as those of IRCTC, which are doing exceptionally well at the bourses. And when the parent company is good (SBI in this case), the demand will be created automatically,” he says.
SBI Cards IPO subscription category
(Source for images: Axis Securities report)