As global markets sank in reaction to the coronavirus, the IPO of India’s second-largest credit card issuer enjoyed an oversubscription where demand for shares was 22 times greater than the shares available, as LiveMint reports.
All eyes are on the allocation of SBI Cards shares after the IPO closed on March 5.
Despite a plunging market, SBI Cards IPO was subscribed over 22 times in one of the most massive share sales in recent times.
SBI Cards, the credit card arm of the SBI, the country’s top public lender, drew bids for 225 crore shares, compared about ten crore shares on offer, stock exchange data showed.
Non-institutional investors category was subscribed 45 times, and individual retail investors 2.5 times.
The word crore is unique to India. According to Webster, Crore’s definition is – ten million; specifically: a unit of value equal to ten million rupees or 100 lakhs. That’s a lot of rupees!
SBI Cards’ ₹10,000 crore IPO is the first by a credit card issuer in India and the fifth-largest by any company in India.
The issue, which opened on March 2, came at a time when global financial markets were roiled by fears of the economic impact of the coronavirus.
But “looking at current economic conditions globally, the IPO has still fared better (than expected),” an economist at Mumbai-based Anand Rathi Securities, Sujan Hajra, told AFP.
India’s biggest bank, SBI, which held 74% of SBI Cards, sold its 4% stake. Carlyle Group, which held 26%, was selling its 10% stake.
The Indian market continues to develop and has an exceptional opportunity for payments in the long term. While the population is similar to China, India’s economy is only a quarter of the value. China’s manufacturing productivity is more significant than India by a factor of 1.6x.
Mercator covered the Indian market in this research report, and in the long term, it is a lenders’ dream. The World Bank classifies the population of 1.3 billion as lower-middle-income. As of 2017, only a third of the residents had a debit card, and a mere 3% held credit cards. The country is progressive and is actively overhauling its financial service products to expand inclusion, which will likely take another decade to complete.
Regarding other stock markets, it looks like a bumpy, market ahead, as the WSJ reported at 10:13 March 10, 2013:
U.S. stocks jumped Tuesday, paring some losses after a stunning selloff Monday hit major indexes with their biggest one-day declines since the financial crisis.
The Dow Jones Industrial Average rose 801 points, or 3.4%, to 24463 shortly after the opening bell. The S&P 500 added 3.4% and the Nasdaq Composite gained 3.6%.
All three indexes had been on the cusp of a bear market—a drop of 20% below recent highs—before Tuesday’s rebound.
But for now, the SBI IPO was a refreshing market winner.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
