Coronavirus scare: SBI Cards drops 10% on debut, HNIs lose Rs 200 per share

Shares of SBI Cards and Payment Services closed 10 per cent below their issue price, with the secondary market crash taking a toll on investor sentiment. Shares of the country’s biggest pure-play credit card company ended at Rs 678, down Rs 77, or 10.2 per cent, over the IPO price of Rs 755.

The weak trading debut contrasted the stellar demand seen during SBI Cards’ Rs 10,300-crore IPO earlier this month. The share sale was subscribed 26 times, generating bids worth a record Rs 2 trillion, underpinned by the expectations of a surge on the listing day.

The coronavirus scare was prevalent at the time of SBI Cards’ IPO. However, the situation worsened in the past week. Since March 5, the closing date of the SBI Cards issue, the benchmark Sensex has come off 18 per cent.

At the time of the IPO, many investors were expecting SBI Cards to list at a premium of more than 30 per cent. The weak listing has hurt several high net-worth individuals (HNIs), who had borrowed money to subscribe to its shares.

Investment bankers say HNIs have suffered a loss of Rs 200 per share as their acquisition cost after factoring in the interest shares worked out to Rs 870. They had placed cumulative bids worth Rs 80,000 crore in the IPO.

The stock touched a high of Rs 755 and a low of Rs 656 on the National Stock Exchange (NSE), with shares worth Rs 4,320 crore changing hands. Another Rs 300 crore worth of shares were traded on the BSE.

The weak debut notwithstanding, many analysts are bullish on the prospects of YES Bank. Macquarie, for stance, has initiated an ‘outperform’ on the stock with a target price of Rs 1,025.

Poor opening show

“SBI Cards is a pure play on quintessential India opportunities -- discretionary, consumption, retail credit penetration, and digital payments. We believe SBI Cards strong parentage, market leadership, brand, and smart strategies will enable it to capture a rising share of India’s fast-growing credit card industry…we believe being India’s only notable standalone credit card company and having growth visibility should ensure premium valuations can be sustained,” the brokerage said in a note.

In the past few years, SBI Cards has clocked strong growth.

“The company has maintained a strong earnings trajectory, with revenue rising at a CAGR of 44.6 per cent to Rs 6,999 crore in 2017, and a net profit trajectory of 52.1 per cent CAGR to Rs 862.7 crore in 2019, with sustainable RoA above 4 per cent and RoE at more than 28 per cent,” says a note by ICICI DIRECT.

Antony Waste withdraws IPO

Antony Waste Handling Cell on Monday called off its initial public offering (IPO) after it failed to garner adequate subscription owing to weak market conditions. The waste management firm’s Rs  200-crore IPO was subscribed only 49 per cent despite lowering of issue price and extension of the closing date by more than a week. Other companies, including Burger King India and Rossari Biotech, have put off their IPO plans amid a sharp selloff in the market.

The SBI Cards IPO was the fourth-largest in the domestic market. Through the IPO, SBI Cards raised Rs 500 crore in fresh equity issuance, which will be used to shore up its capital base. The remaining Rs 9,800 crore was secondary share sale by parent State Bank of India (SBI) and private equity major Carlyle.