Started in 1998, SBI Cards and Payment Services Limited, is the second-largest credit card issuer in India, with a 17.6% and 18.1% market share of the Indian credit card market in terms of the number of credit cards outstanding as of March 31, 2019 and November 30, 2019, respectively, and a 17.1% and 17.9% market share of the Indian credit card market in terms of total credit card spends in fiscal 2019 and in the eight months ended November 30, 2019, respectively, according to the RBI. The company is a subsidiary of SBI, India's largest commercial bank in terms of deposits, advances and number of branches as of September 30, 2019, according to the RBI. Company has a broad credit card portfolio that includes SBI Card-branded credit cards as well as co-branded credit cards that bear both the SBI Card brand and the co-brand partners' brands. Company offers four primary SBI Card branded credit cards: SimplySave, SimplyClick, Prime and Elite. Company has partnerships with several major players in the travel, fuel, fashion, healthcare and mobility industries, including Air India, Apollo Hospitals, BPCL, Etihad Guest, Fbb, IRCTC, OLA Money and Yatra, among others. Company issues credit cards in partnership with the Visa, MasterCard and RuPay payment networks. Company has a diversified revenue model whereby they generate both non-interest income (primarily comprised of fee based income such as interchange fees, late fees and annual fees, among others) as well as interest income on the credit card receivables. The share of the revenue from operations that they derive from non-interest income has steadily increased over the past three fiscal years, from 43.6% in fiscal 2017 to 48.9% in fiscal 2019. From March 31, 2017 to March 31, 2019 company's total credit card spends grew at a 54.2% CAGR (as compared to a 35.6% CAGR for the overall credit card industry, according to the RBI) and the number of the credit cards outstanding grew at a 34.5% CAGR (as compared to a 25.6% CAGR for the overall credit card industry, according to the RBI). As per financial performance, SBI Cards has posted total income/net profits of Rs. 3471.04 cr. / Rs. 371.42 cr. (FY17), Rs. 5370.19 cr. / Rs. 599.34 cr. (FY18) and Rs. 7286.83 cr. / Rs. 859.59 cr. For upto Q3 of FY20, company has posted profit of Rs 1161.21 Cr on total revenue of Rs 7240.16 Cr. So company has shown exceptional performance. SBI Cards has posted an average EPS of Rs. 7.97 and average RoNW of 24.67% for last three fiscals. Issue is priced at a P/BV of 14.6 as per NAV of 51.73 on 31.12.19. As per FY19 earnings, P/E is around 82. If we attribute latest earnings of FY20 on fully diluted equity post issue, then asking price is at a P/E of around 46. As per RHP, there is no listed peer available in market. On BRLM's front, for Axis Capital Limited, DSP Merrill Lynch Limited, Kotak Mahindra Capital Company Limited, HSBC Securities and Capital Markets (India) Private Limited, Nomura Financial Advisory and Securities (India) Private Limited and SBI Capital Markets Limited, have handled around 74 IPOs in last three fiscals, and from last 10 IPOs, 3 opened below issue price and remaining opened above issue price on the day of listing. As of now, from last 10 IPOs, three are trading below issue price and remaining seven above issue price. ( As on 24.02.2020 ) As per financials, results are very good, RoNW is 24% for last three fiscals and issue looks fully priced with respect to current earnings. This industry is growing at around 35.6% rate and it's expected to grow at same rate in upcoming years and being largest player in market SBI is expected to grow above industry average. Performance of BRLMs are good. So we give "RECOMMEND" rating to this IPO for long term investment.
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