State Bank of India has postponed its plans for an initial public offering (IPO) of its life insurance arm, SBI General Insurance. The bank’s Chairman Rajnish Kumar has indicated that they don’t require funds for operations that would necessitate an IPO.
The bank’s plans to tap the market for share capital for its credit card SPV SBI Cards, however, will go on as planned. The likely date for the IPO to open will be within the current financial year, possibly the first quarter of 2020. The bank appears to have done a dip-stick survey to assess the interest on investors and the feedback it has received is that the investors may be keen to make investments in the credit card business as well.
Insurance Australia Group, from Australia holds a 26% equity in SBI General Insurance. The IPO was expected to be held next year and the Chairman has ruled out the IPO in 2021 even. The insurance company has to shed 2% equity from its holding to comply with the norms set by SEBI. Kumar says they have time till 2020 October to get this done. The last valuation done of SBI General put it at around Rs 12,000 crore.
In the case of SBI Cards, the valuation is yet to take place. With 74% stake with SBI and the remaining with the foreign partner, the promoters of SBI Cards will have to take a call on how much they wish to offer to the public.
SBI has shown some aggression of late in driving the credit cards business to the next level. Already, SBI Cards is one of the largest issuers of credit cards in the country. If it goes ahead with the IPO successfully, it may set the trend among the peers in the industry.