SBI Cards and Payment Services Ltd shares advanced 8% on Tuesday as buyers rushed to the counter to accumulate the stock after it closed the listing day at a 10% discount to the issue price.
The SBI Card stock closed the second day of its trade at Rs 736.10, up 8%, after falling to Rs 681.40 in the previous session compared with its initial public offering (IPO) price of Rs 755.
A weak listing was expected for SBI Card amid the ongoing turmoil in equity markets due to the coronavirus outbreak. However, most market experts seemed bullish on the stock with a long-term perspective given the expected robust growth in credit card industry.
“Given top 4 players including State Bank of India (SBI) dominating more than 70% market share (FY19), SBI’s strong parentage, sound fundamentals, niche business and extreme growth outlook, SBI Card to command high P/E and will get advantage for the same. We still remain bullish for the stock for the price target of Rs 1,250 in next 1 year,” Manali Bhatia, senior research analyst at Rudra Shares and Stock Brokers, told Moneycontrol.
Global brokerage firm Macquarie also initiated coverage on SBI Card with an ‘outperform’ rating and a target price of Rs 1,025 per share. The brokerage firm said: “Valuations appear rich when benchmarked against other Indian financials, but given that SBI Card is India’s only carved-out credit card company and has visibility of 30%+ EPS (earnings per share) compounding should help premium valuations sustain.”
The Rs 10,340-crore SBI Cards IPO was oversubscribed 26.54 times during 2-5 March 2020 after most brokerages advised investors to put in money in the issue. The portion reserved for qualified institutional buyers (QIBs) saw a massive subscription of over 57 times, while that reserved for high net worth individuals (HNIs) was subscribed 45 times. The retail portion was subscribed 2.5 times.
SBI Cards is the second-largest credit card issuer in the country with 9.46 million credit cards and 18% share of the Indian credit card market as of 30 September 2019. Meanwhile, HDFC Bank has the largest credit card business in the country with 13.3 million cards issued, while ICICI Bank stood third with 7.9 million credit cards, as of 30 September 2019, according to data from the Reserve Bank of India.