The much-awaited initial public offering (IPO) of SBI Cards and Payment Services Ltd, the credit card unit of India’s largest lender State Bank of India (SBI), is set to open for subscription next week on 2 March. The price band of the Rs 9,000-crore IPO has been set at Rs 750-755 per equity share, while the lot size has been fixed at 19 shares. The SBI Cards IPO is expected to receive bumper response as brokerages are extremely positive on the issue and advising investors to subscribe. Here’s a look at what some of the research and brokerage firms are saying about the SBI Cards IPO:
YES Securities came out with its report on SBI Cards on 26 February and recommended investors to “Subscribe” the IPO.
It said SBI Cards is the second largest credit card issuer in India with deep industry expertise and a demonstrated track record of growth and profitability. SBI Cards also enjoy diversified customer acquisition capabilities and support of a strong brand and pre-eminent promoter – State Bank of India. It noted that some of the company’s other strengths include diversified portfolio of credit card offerings, advanced risk management and data analytics capabilities.
Motilal Oswal recommended ‘subscribe’ to the upcoming SBI Cards IPO. Premium brand, strong distribution, huge growth potential and sound financials were cited as the three key factors behind the brokerage firm’s positive recommendation on the IPO.
SBI Cards penetration among SBI’s vast customer base stands at just 2.2%, creating scope for a huge growth, said Motilal Oswal. It also noted Crisil’s estimates which say that the demographic changes and e-commerce drive consumption pattern in India could further boost credit card spend by 2.5 times over the next 5 years.
Prabhudas Lilladher initiated coverage on SBI Cards and Payment Services with a ‘buy’ recommendation and a target price of Rs 1,191. It believes that SBI Cards is a formidable play on rising discretionary spends and non-cash economy.
ICICI Direct came out with its report on SBI Cards on 27 February and recommended to “Subscribe” the IPO.
SBI Cards offers investment opportunity in unique business model with strong profitability, said ICICI Direct, adding that sustainability of higher business growth and strong return ratios justifies premium valuation for the business.
Choice Equity Broking
Choice Equity Broking also recommended to “Subscribe” the SBI Cards IPO in its research report dated 27 February.
“We firmly believe that SBI Card is not a pure play NBFC, so valuing it on P/E may also make sense. At higher price band, the company is demanding a P/E multiple of 50.3x (to its restated TTM EPS of Rs 15). Based on FY22E EPS, the demanded P/E comes out to be 39.4x,” it added.
Geojit Financial Services
Geojit has recommended to “Subscribe” the SBI Cards IPO in its research report. It said the valuation looks justified taking into consideration the historical high growth rate.
“Given strong parentage and sustainability of growth rate with huge potential for digital payments in India, we recommend ‘Subscribe’ to the issue with a long-term perspective,” it added.