Indias SBI Cards Files Papers For $1.3b Public Offering

SBI Cards and Payment Services Ltd, the credit card unit of the country’s largest lender, on Wednesday, filed initial share sale documents that could see the company sell shares worth around ₹9,600 crore.

The share sale is poised to become the fifth-largest IPO in the country after Coal India Ltd, Reliance Power Ltd, GIC Re, and Oil and Natural Gas Corp and will help parent State Bank of India (SBI) raise funds to boost credit growth.

SBI, which holds 74% stake in the unit, along with private equity firm Carlyle Group, which holds the rest 26% through its subsidiary CA Rover Holdings, will together sell 130.5 million shares through the IPO.

“The secondary component of the IPO could be ₹9,100 crore and will give a partial exit to both its shareholders. While Carlyle is looking to sell 10% stake via the IPO, SBI would sell 4% stake in the company,” two people aware of the matter said, requesting anonymity.

The company is looking to list within the next 3-4 months at a pre-money valuation of ₹65,000 crore, one of the two people said.

The initial share sale also includes a fresh issue of shares that will see the company raise ₹500 crore to augment its capital base and for business growth.

“The secondary markets have seen bit of a recovery and that has also spurred some activity in the IPO market. But the positive response is still restricted to good quality companies that have a retail consumer franchise. Many small-cap companies are still finding it tough to get the desired pricing. That said, in the past nine months, the sentiment was really negative and IPO activity was consequently very slow, but it is likely to see some pickup in the coming quarters,” said Mukund Ranganathan, executive director at Motilal Oswal Investment Banking.

The book running lead merchants to the issue are Axis Capital, Bank of America Merrill Lynch, HSBC, Nomura, Kotak Mahindra Capital and SBI Capital.

SBI Cards is the second-largest credit card issuer in the country with 9.46 million credit cards, and had a 18% share of the Indian credit card market as on 30 September. The company started operations in 1998 as a joint venture with GE Capital Corp. In December 2017, GE Capital sold its 40% stake in the company to SBI and Carlyle.

HDFC Bank has the largest credit cards business in the country with 13.3 million cards issued, while ICICI Bank stood third with 7.9 million credit cards, as of 30 September, according to data from the Reserve Bank of India.

For the six months to September, SBI Cards reported a revenue jump of 36% to ₹4,363.9 crore from a year ago. Its profit jumped 78% to ₹1,034.58 crore during the period.