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Carlyle-backed SBI Cards joins market rout as shares crack 13% on debut
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SBI Cards & Payment Services Ltd, which saw a bumper turnout for its initial public offering earlier this month, slumped on its trading debut on Monday as India and global stock markets continued their free fall.

Shares of India’s second-largest credit-card issuer began trading on the BSE at Rs 658, down 12.85% from the initial public offering price of Rs 755 apiece. The stock touched a high of Rs 755 in early trade as it looked to trim its losses.

The stock touched a high of Rs 755 in early trade as it looked to trim its losses, before closing the debut day at Rs 683.20 apiece as selling pressure mounted.

The BSE’s benchmark Sensex, which had staged a dramatic reversal on Friday after hitting a lower circuit, fell nearly 8% on Monday as the fears of the coronavirus pandemic led to drastic measures the world over.

In an emergency action, the US Federal Reserve on Sunday cuts its interest rates to almost zero to support the economy.

Following the Fed, the Bank of Japan (BoJ) announced it would double the purchasing limit of exchange-traded funds (ETF) to 12 trillion Japanese Yen ($112 billion), and was even prepared to cut interest rates further into negative territory from the current -0.1%.

The Reserve Bank of India is scheduled to meet later on Monday to brief on the situation on India’s banking and financial markets.

The weak debut by SBI Cards, which is backed by private equity giant Carlyle, follows an IPO that weathered market volatility barely two weeks ago. The Rs-10,350 crore IPO was subscribed 26.5 times thanks to high demand from investors across categories.

However, market conditions have deteriorated after the closure of SBI Cards’ IPO as the Sensex has lost 15.7% in six trading sessions.

At the upper end of the Rs 750-755 price band, SBI Cards was seeking a valuation of Rs 70,891.24 crore ($9.9 billion) via the IPO. Its market capitalisation now stands at Rs 64,149.53 crore.

The IPO comprised a fresh sale of shares worth Rs 500 crore and a sale of 130.52 million shares by Carlyle and State Bank of India. The PE giant has offered to sell 93.23 million shares or a little over a third of its 26% stake.

Carlyle had invested in SBI Cards through its fourth Asia buyout fund, which focuses on control deals and makes significant minority investments in established companies across the continent excluding Japan, in 2017.

Carlyle’s 26% stake in SBI Cards now stands at about 15.9-16%. SBI’s 74% stake has declined to roughly 69.5%, VCCircle estimates show.

SBI Cards, which was incorporated and started operations in 1998, is the second-largest credit-card issuer in terms of a number of cards outstanding and the amount spent. It had 9.46 million cards outstanding as on September 30 last year. It only trails behind HDFC Bank in terms of the number of cards issued.

Kotak Mahindra Capital Company, Axis Capital, DSP Merrill Lynch (a Bank of America subsidiary that operates in India), HSBC Securities and Capital Markets (India), Nomura Financial Advisory and Securities (India), and SBI Capital Markets are part of the merchant banking syndicate arranging and managing SBI Cards’ IPO.
 

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