Although the markets have been crashing amid the coronavirus outbreak, Dalal street this week may witness a rise, mainly thanks to the SBI Card Initial Public Offering (IPO), which opened for subscription today.
For those not well-versed with the term, IPOs are the first time that the stock of a private company is offered to the public. Usually, IPOs are offered by smaller companies looking to expand, so SBI's IPO will be the largest one after General Insurance Corporation of India came out with its IPO in 2017.
SBI Cards proposed to raise Rs 10,289 crore at the lower end of the price band (Rs 750 per share) and Rs 10,355 crore at the upper end (Rs 755 per share), bankers announced last week. There is also a major discount for those working with SBI and looking to buy the IPO.
According to Santosh Meena, Senior Analyst, TradingBells, the SBI IPO will do well for the following reasons:
- It is the second largest player in the Indian credit cards market with nearly 18 percent market share
- India is under-penetrated in terms of credit card market and the government has a focus on digital transactions.
- The first company to list from the credit card industry.
- It also has the strong parentage of SBI, which provides access to its extensive branch network.
- SBI Card’s total credit card spends grew at a compounded annual growth rate of 54.2 percent over FY17-FY19 compared with an industry average of 35.6 percent.
- It has 18 co-branded partnerships, the highest in the industry compared to other players.
But if you're looking to buy an SBI IPO, you need to be one of the following:
Retail investors: SBI has reserved around 4.2 crore shares for this category. A retail investor can apply for a maximum 14 lots as the upper limit of the investment is capped at Rs 2 lakh as per regulations.
Employees: SBI has offered a 75 per cent discount to employees
Qualified institutional buyers: This category includes mutual fund firms, insurance companies, global portfolio managers, etc
SBI shareholders: Retail investors who hold SBI shares can apply for the IPO. Even if you own one share, you are eligible
Non-institutional investors: This category includes High Net Worth Individuals (HNIs), corporates, private companies, non-banking financial corporations, etc
Anchor investors: Qualified institutional buyers can also participate in the IPO process under this category.