About Company SBI Card
Incorporated in 1998, SBI Cards and Payment Services Limited is a subsidiary of SBI, India's largest commercial bank in terms of deposits, advances and the number of branches. SBI currently holds (along with its nominees) 689,927,363 Equity Shares, constituting to 74.00 % of the pre-Offer issued, subscribed and paid-up Equity Share capital of the Company.
The company the 2nd largest credit card issuer in the country, with a 17.6% and 18.0% market share of the Indian credit card market (number of credit cards) as of March 31, 2019 and September 30, 2019 respectively and a 17.1% and 17.9% market share of the Indian credit card market ( total credit card spends) in fiscal 2019 and in the six months ended September 30, 2019.
SBI Cards has partnered with several leading names across industries, including Air India, Apollo Hospitals, BPCL, Etihad Guest, FBB, IRCTC, OLA Money and Yatra, amongst others.
As a subsidiary of SBI, the company has access to SBI's extensive network of 22,007 branches across India. The partnership enables it to market its cards to a huge customer base of 436.4 million customers.
What makes this company Unique?
- They are the second-largest credit card issuer in India, with an 18.0% market share of the Indian credit card market in terms of the number of credit cards outstanding as of September 30, 2019.
- It is a subsidiary of State Bank of India.
- They offer an extensive credit card portfolio to individual cardholders and corporate clients which includes lifestyle, rewards, travel and fuel, shopping, banking partnership cards and corporate cards covering all major cardholder segments in terms of income profiles and lifestyles.
- Leading player in open market customer acquisitions using physical and digital channels in India.
- Diversified credit card portfolio and partnerships with leading brands across industries.
Revenue Model
(a) Non-interest income (primarily comprised of fee-based income such as interchange fees, late fees, and annual fees, among others)
(b) Interest income on credit card loans.
(c) MDR ( Merchant Discount Rate)- The fees credit card company charges from the merchant for providing a facility to pay when a customer buys the product from the shop. Here, three business comes into the picture.
Credit Card Company (1st Business) charges a 2-3% MDR fee from the merchant to facilitate the buying option for customers. Now, the credit card company alone can’t do this transaction. It is only providing the credit facility to customers. The transfer of money from a credit card company to a merchant’s bank account is facilitated by the Network providers (2nd Business), such as Master Card, VISA & payment gateways companies. Now, finally without POS Machine (3rd Business) both the above business is of no use. So, here comes the third business, i.e. Swap machine provider.
Here if the Credit Card company is charging Rs.100 as MDR Fees from the merchant, then 75-80% goes to Credit Card company, 20-25% to the network provider or rest to POS machine provider.
Financial Performance
(a) The total income increased from Rs 3471 Crores in fiscal 2017 to Rs 7286 Crores in fiscal 2019 at a CAGR of 44.9% and revenues from operations have increased from Rs 3346 Crores in fiscal 2017 to Rs 6999 Crores in fiscal 2019 at a CAGR of 44.6%.
(b) The net profit increased from Rs 372 Crores in fiscal 2017 to Rs 862 Crores in fiscal 2019 at a CAGR of 52.1%.
(c) The ROAE has remained stable at 28.5% in fiscal 2017 and 28.4% in fiscal 2019, while ROAA increased from 4.0% in fiscal 2017 to 4.8% in fiscal 2019.
Objective of the issue
The Offer comprises of a Fresh Issue and an Offer for Sale-
(a) The Offer for Sale of 11,56,09,450 @755 = Rs 8,728.51 Cr
(b) Fresh Issue- 66,22,516 @755 = Rs 500.00 Cr
Other IPO Detail
Individuals with SBI shares in their DP account as on 18th February, 2020 can apply in both -Retail and Shareholders category, if application amount is Retail.
This IPO will be kept open for 4 days, and 4th Day will be only for Retail, HNI and Shareholders. Biding of 4th Day will be closed at 5:00 PM.
Open Date:
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Mar 02 2020
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Close Date:
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Mar 05 2020
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Finalisation of Allotment
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Mar 11 2020 (Tentative)
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Initiation of Refunds
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Mar 12 2020 (Tentative)
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Credit of Shares to Demat
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Mar 13 2020
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IPO Listing Date
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Mar 16 2020
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Total Shares:
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137149315
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Face Value:
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Rs10 Per Equity Share
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Issue Type:
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Book Building
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Issue Size:
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8500 Cr.
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Lot Size:
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19 Shares
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Issue Price:
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Rs 750-755 Per Equity Share
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Retail Discount:
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Rs.15 (for employees)
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Listing At:
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NSE, BSE
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Risk:
The only risk credit card companies have is the impact on business due to the slowdown in the economy. In the slowing economy, the loss of jobs happened quite fast. Loss of job has the first casualty on Credit card payment. As these companies don’t have any other business, the risk will be more in a prolonged slowdown.
Conclusion
- SBI Card has shown tremendous growth in terms of revenue in the last 3 years. After demonetization, the demand for cash reduces which has given impetus to credit card companies.
- SBI Card PAT has grown from Rs. 372 Crores to Rs.859 Crores in the last 3 years.
- The company has ROE (Return on Equity ) of 25%, 25% and 23% in FY16-17. 17-18 and 18-19, which is excellent.
- No peer of this company is listed as on date.
- Since promoter i.e SBI is largest PSU bank having many branches across our country hence reach to people for SBI cards will be very high.
Verdict: One should definitely apply for this IPO, for listing gains and for long term purview.
Sources: Various publications
Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.
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Nice info!Useful post for everyone. Thanks for sharing.
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