SBI's credit card arm files offer document for Rs 9,500 crore IPO
SBI's credit card arm files offer document for Rs 9,500 crore IPO

SBI's credit card arm files offer document for Rs 9,500 crore IPO

The issue will comprise fresh fund raising worth Rs 500 crore.

SBI Cards and Payment Services has filed the draft red herring prospectus (DRHP) for its upcoming IPO. The credit card arm of India’s largest banking institution, the State Bank of India, hopes to garner up to Rs 9,500 crore from this offering, as per reports.

If the IPO sails through smoothly, it might come as a breath of fresh air to the overall economic scenario in the country, though despite all the talk of a slowing economy, the stock indices have been attaining great heights.

SBI Cards and Payment Services is a joint venture between State Bank of India with 74% equity and the Carlyle Group holding the remaining 26%. Both are now liquidating their stakes to the public through this maiden IPO. In terms of the numbers, 37.3 million shares of SBI and 93.2 million shares of Carlyle will be up for subscription. The venture is being valued at Rs 65,000 crore. Based on this reckoning, SBI hopes to gain Rs 2,500 crore while the Carlyle Group will pocket Rs 6,500 crore, a considerable gain considering that for the 26% equity, Carlyle had paid only Rs 2,000 crore just 2 years back.    

SBI had gone public with another of its subsidiaries, SBI Life Insurance some time earlier.

SBI Cards is the second largest card issuer in India after HDFC cards. Market observers feel seeing the success of SBI Cards and the IPO it is floating others like HDFC may also be tempted to create a separate credit cards company and go public.

Coming back to SBI Cards, the credit cards business has achieved a revenue of Rs 7,000 crore and a profit of Rs 862 crore. The bank charges other fees apart from the interest on the credit card dues beyond the interest free period. These include annual fees and late payment fees. The bank encourages customers with outstanding on other bank credit cards to transfer their balances to SBI cards for which a fee is included. All these non-interest incomes have also boosted the overall revenue for the company.

There are as many as six bankers handling the SBI Cards IPO, Kotak Mahindra Capital Company, Axis Capital, Bank of America Merrill Lynch, HSBC, Nomura, and SBI Capital.

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