SBI Cards and Payment Services Ltd IPO Message Board (Page 84)

SBI Cards IPO: long thread on valuation disasters in Indian markets & how these rip off the retail investors: Basic stats first:
13 crore shares offered out of total of 93 crore stocks. 14% float at Rs 750 per share is valuation of Rs 70 thousand crore to SBI Cards. #sbicards

This US $ 10 Billion market cap. They say this is the only card company getting listed so a great opportunity. We'll see some numbers & benchmarks internationally. At FY'19 profits of Rs 862 crore & EPS =Rs 9.43, we get a Price Earning ratio of 80 !!

I know many will justify citing the growth prospects. I have a few questions to explore.Firstly, what is the highest PE of any mature financial company in India? Look at HDFC bank, Kotak, etc & we see much modest PEs of 25 to 35 for HDFC Bank & Kotak. And they are richly valued.

But there is a track record of 20 yrs & more for these banks. Many argue that credit cards is a growing industry & has huge potential to penetrate, unlike some mature retail banks that are settling at much modest growth numbers of 20% now. PE multiples have accordingly matured.

Do you think that credit card is different than retail banking & is in a super-normal growth phase in India? Think again. You just need to read beyond the headlines & dig in more data. SBI cards has been around for more than 20 years now in market.

And last 20 years have seen the card industry mature & evolve reasonably well. It has hit the maturity phase quite sometime back in terms of penetration. Look at the table below to understand this: https://t.co/ibqMnTiXvz

In-fact there are many players who chose to shrink in size after 2008 rather having paid the price of reckless growth that the Indian market is not ready for. Citi, ICICI, Amex, StanC & HSBC prove the point that card industry in Indian has limited penetration potential.

See how the overall credit card lending shrank during 2009 & 2015. The red block is getting thinner. Same story happened with education loans that grew & then reached maturity soon enough. Then just receded from that point. https://t.co/g10BEwDt3K

HDFC did well as it issued cards only to the bank customers where it has an implied collateral of bank deposits. As long the FD is intact, the customer won't default on the card. If they do, well the bank & manage the rest. That strategy proved right.

SBI cards has a different problem through. While SBI has crores of customers, most are not credit worthy & have marginal balance. Additionally, most SBI customers are old generation conservatives that don't like to use digital payments at all. A small anecdote fits well here.

I can recall 2003 when SBI cards issued free cards to all PPF customers under some agreement. The sales pitch was simple - "Sir, SBI is issuing free credit card since you hold a PPF account. Branch mgr wants us to give you this gift ! Just sigh here pls." Boom. A card is created.

This policy got close to a million new customers to SBI cards but at what cost? Card company doesn't make money by issuing cards. It wants people to use cards for credit. The card usage for PPF customers of SBI was not even 20%. So 80% of those never used the card even once.

So, this talk of having access to SBI customer database is a tried tested theory that doesn't work. Well it works to get the new card issues in the short run but lack of such card usage doesn't get any money to SBI cards eventually. So it is just a window dressing.

I see a similar narrative being built now. SBI cards IPO document doesn't include much details around the history before 2015. The years before that were all about a shrinking industry, all this when the overall credit in retail was having a best of time.

It's just in the last few years that the industry has again seen some fresh spends & new cards. However, most banks are staying away from any reckless growth, They all have learned the history well & will expand only a limited pace that the market can absorb.

Everyone wants to be rational. However, when you're looking to list thru an IPO, the priorities are different. SBI Cards issues cards outsmarting every competitor. It doubled the workforce every year for last 2 years. See the employee expenses in 2017, 2018 & 2019 below. https://t.co/Tb1yeK9LRJ

Why does this happen ? Well because someone wants to issue cards at much faster pace vs the competition. Other banks don't care as they want profitable growth with stable rates. But SBI cards wants a profitable exit, not sustainable growth. So, we get this. https://t.co/r2a3dgeKVh

While HDFC bank, is happy with stable market share, Kotak is in-fact reducing the cards to optimize profitability, one player is in a tearing hurry to issue cards, It issues 45% of credit cards in India in the most recent month reported. Who is this player in a hurry ?
SBI Cards

Lending business however works very differently. You can always grow by lending money fast. The real fun actually starts later when you have to get the money back. Doesn't look like a top priority for the company as of now.

So, the below growth numbers in spends & market share doesn't impress me. If HDFC & Kotak with their proven lending practices are not growing, I would worry if some else is. SBI Cards is stable till 2017 & then suddenly grew by 100% in 2 years till 2019. Not a consistent trend. https://t.co/RKIFaNAXkZ

Notice another pointer in the date above. Citibank with just 6% of cards share has 13% or spends. SBI cards takes 18% cards share to generate a 16% share in spends. Citibank is chasing profitable customers & is almost not increasing its cards base.

Another look at the channel sales data throws the same conclusion. Look how the share of sales from SBI branch channel has increased from 35% in 2017 to 45% in 2018 to 55% in 2019. Hmmm…..more PPF cards I guess. Will that issuance make money ? I doubt it. https://t.co/f37uI2ihN1

Armed with this background, lets get back to the IPO valuation. Is it worth a buy ? Let's see.
So, with a FY'19 PE of 80 , if someone tries to sell me the story of growth in cards issued over last 5 yrs(which basically is in last 2 years), I'm not going to buy it.

The stable cards base of SBI cards is 3.6 Mn that it had till 2017, just before the window dressing started ¬ the 8 to 10 Mn number that SBI wants us to believe. The growth in last 2 years will produce lots of dead cards but not profits.

I see the rise in spends but that's keeping in line with industry trend. The peak however is quickly reached in India & delinquencies follow soon-after. If HDFC, Kotak, have stabilized, I don't see why SBI could grow so fast & not profitably. And it has seen bad debts in 2008.

Finally at US $ 10 Billion valuation, I think it is quite generously valued. While there are no Indian card companies listed, we can compare this broadly to Discover Financial & Capital One in USA.

Discover with $ 74 BN in credit card assets is valued with market cap of $ 20 BN. SBI cards with assets of just $ 3 BN is valued at $ 10 Billion ??? Someone is definitely being very bullish here.

Just to put this number in context, see the market cap of Indian banks below:
HDFC Bank - $ 92 BN
ICICI Bank - $ 45 BN
Kotak Bank - $ 44 BN
Axis Bank - $ 28 BN
IndusInd Bank - $ 11 BN
Do you think that credit card arm of SBI is equal to entire IndusInd bank & 1/3 of Axis bank?


Fair valuation for PE firm CA Rover looking to pull capital invested. For investors, I guess you'll be buying something at 3 times the actual price. Will I put my money on it? Absolutely not. There is no money left on the table. And I don't believe in paying for PE firm profits. This text is comment by some one on Twitter that which I copy pested here for our knowledge and foram. We have right to differ with this.

Good information

Market is irrational place, it has its own way of deciding the price for stocks.
Dmart was extremely expensive at Rs 600 and still extremely expensive at Rs 2300. But still keeps moving up.

"please note that the terms of the Offer include reservation of up to 13,052,680 equity shares of the Company on a proportionate basis for the shareholders of State Bank India as of the date of the RHP."

Can anyone confirm what exactly proportionate basis means under shareholders category ?

Is it purely based on subscription rate irrespective of no of SBI shares held by applicant ? or
Is it Proportional to no. of SBI shares held by applicant ? or combination of both ?

CAN I APPLY THROUGH SBI ASBA IN SH CATG. AND RETAIL CATG. BOTH

Yes

Is subscription not low

CAN I APPLY THROUGH SBI ASBA IN SH CATG. AND RETAIL CATG. BOTH
IN SAME DMAT ACCOUNT

SBI WANTS, SO MUCH MONEY, and didnot have confidence of good subscription, so i find it's ads everywhere. every known site has sbi ipo ads flashed.

Bhara Bhar ke paise do. and if negative listing, keep shares for 1 yr.
same happend in histroy when icici prudential listing, so much grey market activity, and ads. issue was also big, 6000 crs. and listed negative. after 2 yrs. it came to positive zone.

I' apply from sbi ASBA
pata hai kya kisko ki cancel kese karna hai plz
Bataon

1640.5 देखें।

1640.5 देखें।

This is sure shot discount listing now. 21 confirmed coronavirus cases in India now. The market has started panicking nd bleeding. No sigh of relieve in near term.

PLZ do not create panic here....mim listing gain of 10-15% even in worst scenario...mid term to long term it is excellent portfolio pick....apply.

Amit Bhai no doubt it is a good company and an excellent pick but all this depends on market situation which is already in great stress. i suggest you to wait and buy on discount opening.

Qib already 3.5 times , it is good sign

Latest GMP is 140-150 Decline from 340--350 . Lets see tomorrow and then apply

HOW CAN CHECK BID STATUS IN BSE

This link is not showing any details when I am entering my application number and pan no. What does it mean

This link not showing any information when we enter shareholder categories application

Qib figure dekhkar dar lag rha h. Meri mehnat ka paisa h isliye feeling share kiya tha na ki fattu sunne ke liye. Bewkoofi ki had hoti h

Cancel your bid mehnat ke paise se badh kar iss duniya me kuchh nahi. Jaldi se cancel kre app

yaha log lakhs me roz loss krte hhein..r isme sb 1000 rs loss k lye darr rhe..????

I want to apply for 5 lacs in shareholder quota. Can I apply it tomorrow? Whats the last day for this one?

Yes , you can.

Bahut achha response nhi hone wala hai to soch samajh kr paisa lagaye..

latest grey market premium ?

Shear holders ko ipo milna confirm hai kya

Look at qib portion 3.50 times at11:00 pm .I think it will be chang scenario at evening.gmp also will be shoot up if qib portion more than 10 times.it also impact on hni & retail portion.good luck.

Retail Subscription on the basis of Apps : 0.92 x

25 demat acc se apply kiya hu yr. Kash ek b allotment na ho.

Dekh lena aaj sham ko mood badal jayega

Ha ha ha..

FWD MSG 1. Story of SBI Card IPO -

Someone became super-rich, others not ... !!

Who is the SBI card :-
It is 74% SBI (State Bank of India) and 26% Carlyle group.

We all know SBI.

But, who is Carlyle group?
It is a private equity fund which bought 26% share of SBI Card from a GE group company at Rs.2000 Cr.

After the IPO, who will be SBI Card? :-
It will be 70% SBI - (It is diluting its shares.)
It will be 16%, Carlyle group. - (It is diluting its shares.)
And 14% New Shareholders.

At the issue price of Rs.750-755, what will be the company's worth ...?
Ans :- Rs. 71,000 Cr.

So, for a minute, let's assume if Carlyle group is also diluting the same percentage of shares as of SBI, how much will be the worth of Carlyle group shares?
Ans :- Approx Rs. 17,500 Cr.

WOW a windfall gain for Carlyle group - Isn't it?
In just 3 years, Rs. 2,000 Cr has become Rs.17,000 Cr for them. Approx 8.5 times return ... !!!????

Yes, at the current valuation of the SBI Card, Carlyle group is making 8 times return in just 3 years...????

In all the noise of this IPO, did you know about this part of the game ...??

Well, I have no issues with someone getting super-rich. It is capitalism.

But, what about the other investors of SBI Cards...???

Well, SBI is also one of the investors. And many other retail investors who have their investments in SBI.

They have made 5% return in 5 years. Yes, SBI share price has gone to Rs. 320 from Rs. 305." Only *Rs. 20, i.e. just 5% return in 5 yrs... !!!????

So, the question here is :-
One investor is getting 850% return, and other sets of investors are getting a 5% return post this successful IPO launch ... ??????

Well, I have an issue now.

It is not the right side of capitalism or valuation. Amazing performance of SBI Card should have reflected in the share price of SBI bank too. But, it hasn't. (Below image for SBI share price taken from screener website)



2. Now, let's understand, IPO and OFFER FOR SALE.

IPO - Money raised through IPO, goes to the company, on the balance sheet.

Offer for Sale - Money raised via Offer For Sale goes to promoter's/early investor's bank account.

So, what is happening here with SBI card IPO ...??

Well, in this much-hyped IPO of Rs. 9000 Cr. has below bifurcation :-

So, called total IPO size :- Rs. 9000 Cr.

1) Fresh Issuance (IPO) - 500 Cr. - So, out of Rs. 9000 Cr. proposed raise, only Rs.500 Cr . will go to SBI Card company.

2) Rest of the amount - Approx Rs. 8500 Cr - via Offer for sale - which means around 95% of the money raised via this IPO process will be taken home by SBI and Carlyle group.

I must mention here that the Carlyle group will be taking home approx Rs. 7000 Cr. home.

Yes, with Rs. 2000 Cr. investment, they will make Rs. 7000 Cr. now and still hold 16% shares of this currently valued Rs. 70,000 Cr. company. That totals to another approx Rs. 10,000 Cr. worth of shares... !!????

Again, no offence with Carlyle group's handsome return. The issue here is only one, "Why didn't retail investors of SBI made even one-tenth of what Carlyle group is making ... !!"????

And, this story gives me the intent and need of this IPO.

Right, the need of the IPO is not to raise money for business expansion but to give exit with handsome profit to the Carlyle group. And, I wonder, "Is SBI working for us or working for foreign registered Private investors...??" ????

So, knowing their intent behind this IPO, I would stay away from investing in this company at Rs. 750-755. I would have surely thought about investing in it provided this Rs. 9000 Cr would have been used for strengthening the company's business.




3. What about the valuation?

Yes, and let's explore the relative valuation. Let's compare it with other companies in the same business.

Well, we have no listed company in the same segment. Yes, SBI Cards's only business is CREDIT Cards. It earns revenue only through credit cards business. And, we have no other company in this segment to compare.

But, yes, we have one international company to compare. And, most of you must have heard their name.

AMEX

American express.

Yes, at Rs. 750. offering price of this IPO, SBI Card is demanding 46 times Price of their latest earning. Yes, PE ratio will be 46 for SBI Card.

AMEX's PE is 17. (half of it's business comes from Credit Cards segment only)

Which means SBI Cards at Rs. 750. is 2.7 times expensive than AMEX.

But, can we compare AMEX and SBI Cards... ??

Well, not really. AMEX is much better a company than SBI Cards.

- Global,

- Robust,

- Historical
Performance,

- Good returns for shareholders,

- Risk coverage,

- Management.
- I would rate them better than SBI Cards in almost all front.

And, you can't tell me the same old rhetorical logic of India's population. AMEX operates in India as well. If Credit Cards business grows multiple folds, AMEX and other players will get benefitted too.

I don't see a point of buying expensive shares of an inferior company.

Well, on relative valuation front, I would again not apply in SBI Card IPO.