SBI Card IPO overvalued at issue price of Rs 755: Experts

Mumbai (IANS) The much-anticipated SBI Card IPO has finally completed with an issue price of Rs 755 per share, however, market experts feel that the price is too expensive.

The SBI Card IPO demands around 46 times of the price of its latest earnings and a price-to-book ratio of 14.5 times, which according to experts, are on the higher side.

The company, though, has not listed the counterpart in India, American Express, a company which derives a majority of its revenue from services such as credit cards trades with a price which is 17 times of its latest earnings.

SBI Card priced at Rs 755 is around 2.7 times expensive than American Express, according to analysts.

In comparison to a global company such as American Express, which gives good returns to its shareholders with better better risk coverage, the issue price fixed for SBI Cards is overvalued, they said.

Around 74 per cent stake in SBI Card is held by State Bank of India and Carlyle Group owns 26 per cent in SBI Card. Carlyle Group is a private equity fund which bought 26 per cent share of SBI Card from a GE Group company at Rs 2,000 crore.

Post IPO, SBI Card will have 70 per cent stake as its is diluting its shares and Carlyle Group will have 16 per cent, while the new shareholders will get 14 per stake in the credit card company.

At the issue price of Rs 755, SBI Card's valuation is likely to be around Rs 71,000 crore. With Carlyle Group diluting its shares, analysts said it is likely to gain around Rs 17,500 crore, 8.75 times times higher than the price it had bought stake in the company.

Experts feel that the performance of the SBI Card IPO should have reflected in the share price of SBI too, which is the majority shareholder in the credit card company.

The IPO size was apparently Rs 9,000 crore, with a fresh issuance of Rs 500 crore, thereby rendering Rs 500 crore for the SBI Card company. The rest Rs 8,500 crore, around 95 per cent of the total amount, will be taken by SBI and Carlyle Group, the promoters, which has also raised questions on the actual beneficiaries of the IPO.

The issue of SBI Card and Payment Services, the country's second-largest credit card issuer on March 6 fixed the final issue price for its initial public offering at Rs 755 per share. The issue closed on March 5.

The company raised Rs 10,340 crore through the issue which was open for subscription between March 2-March 5.