Largest IPO of 2020? SBI Cards plans to raise $1.25 billion
- The SBI IPO stands to become the biggest in 2020 as it seeks to raise up to $1.25 billion
- The bank will be looking to use the funds to boost its creditworthiness
- Its recent report indicates a net profit of Rs 862 crore
India’s largest public-sector lender State Bank of
India (SBI) has announced plans to issue an Initial Public Offering
(IPO) next year. The bank submitted its IPO prospectus to the market regulator Securities
Exchange Board of India (SEBI) this week and intends to give away a 4% stake in
the company.
The credit card business is
planning to net about Rs 9,600 crore from the market using the offer-for-sale technique.
Upon issue, the IPO will become the fifth largest in the state, just four slots after its predecessors Coal India, Reliance Power, GIC Re, and Oil and Natural Gas Corp. However, it will be the biggest IPO for FY 19-20.
According to the bank, the share sale will assist
it to augment its credit growth.
At the moment, the bank is owned by only two shareholders;
SBI, the main stakeholder commands a 74% stake and private equity firm Carlyle
Group (through its subsidiary CA Rover Holdings) comes in second with a 26%
stake. The two agreed to jointly give up 13 lakh shares or 14% of the bank
through an IPO.
Sources indicated that the IPO will most likely
go live in early 2020.
While SBO will be looking to release 4% through
the IPO, Carlyle will be giving away about 10% of its share in SBI.
The share sale’s proceeds will largely go
towards boosting the bank’s capital base, with the firm agreeing to set aside
at least Rs 5000 crore for the undertaking. But generally, the company will be
looking to raise between Rs 8,000 and 9,500 crores through the IPO.
The deal’s underwriters include Axis Capital,
Bank of America Merrill Lynch, HSBC, Nomura, Kotak Mahindra Capital, and SBI
Capital.
When it comes to SBI’s financials, the figures
aren’t so bad.
Between the financial years, 2017 to 2019, the
bank’s credit cards spend saw a tremendous growth of about 54%. The company’s
revenues come from incomes that are fee-based including late fees, interchange
fees, annual fees, plus a few others.
SBI Cards recorded revenues of about Rs 7,000
crore and a net profit of Rs 862 crore for the period ending September 2019.
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