New Delhi: SBI Cards & Payment Services filed for IPO. The company fas filed draft red herring prospectus with capital market regulator Securities and Exchange Board of India (SEBI) on Tuesday (November 26). The company seeks to raise Rs 500 crore from the primary share issue.
For those who are not aware, SBI Cards is a joint venture between SBI and buyout firm Carlyle where SBI owns 74% and the Carlyle owns the remaining 26%. Both companies will sell a part of their stake in SBI Cards through the IPO. SBI Card’s present valuation of Rs 57,000 crore is more than seven times the valuation of Rs 8,000 crore at which Carlyle had bought 26% stake from GE Capital in 2017 after the latter decided to exit the joint venture after two decades.
According to reports, the issue consists of Rs 500 crore of fresh issue and an offer-for-sale of Rs 13,05,26,798 equity shares by SBI and CA Rover Holdings, an affiliate of US-based Carlyle Asia Partners IV. SBI is reportedly expecting a valuation of Rs 53,000 to Rs 60,000 crore for its cards unit in the IPO. SBI Card is looking to raise around Rs 9,000 crore from this IPO.
It may be noted that SBI announced last month that it will divest 4 per cent of its 74 per cent stake in the subsidiary. Carlyle Group which owns the remaining 26 per cent in the company, will reportedly divest 10 per cent of its share. Of the total offer for sale, SBI will sell up to 3,72,93,371 equity shares and CA Rover up to 9,32,33,427 equity shares through this IPO.
It is worth mentioning that this could be the biggest IPO of the financial year 2019-20 if the SBI Cards get a go-ahead from the market regulator. According to sources, the management is planning to hit the markets before March next year. After the public issue, promoters will dilute further stake in the next three years, according to sources and will bring down their stake to 75 per cent in order to meet the minimum public shareholding norms set by SEBI.
Note that in a request for proposal inviting bids from merchant banks and law firms in August 2019, SBI Cards had said, “The company intends to tap capital markets via IPO through Offer for Sale by dilution of up to 14 per cent of the issued and paid-up capital.”
It is worth noting that according to Jefferies, SBI Card is very profitable with a card base of 9.5 million, a net worth of Rs 4,388 crore and capital adequacy of 18.9 per cent. Currently, the company has a market share of 18 per cent in the number of cards and 17.7 per cent in terms of spends. SBI Card’s profit grew 92% to Rs 727 crore in the first half of the current financial year from Rs 378 crore in the year-ago period. Return on equity for the company was at 36%.