Buy signals for SBI Card
The SBI Cards and Payment Services IPO will give the listing gains for the short-term despite a higher valuation, according to market experts.
In the long-term, the stock could continue to command rich multiples, since it is the only pure-play card company in India, said Osaka Matsui Management.
Backed by prospects of a surge in use of credit cards by India’s young population, the initial public offering (IPO) of SBI Cards and Payment Services opened with a price band of Rs.750-755 per share.
This was nearly 48 times the earnings per share (EPS) of the first half of FY20 (annualised) of Rs.15.6 and approximately 16 times book value of equity per share (BVPS), Osaka Matsui Management reported on 3 Mar 2020.
Because of its strong market position, revenue strength, improving profitability and stable asset quality, SBI Card has fetched buy signals from analysts and brokerages.
“Given SBI Card’s strong market position, revenue strength, improving profitability and stable asset quality, we remain optimistic for the long-term,” said Michael Carter, Head of Global Equities, Osaka Matsui Management.
“Furthermore, with rising disposable income, a young Indian population, a surge in the use of credit cards for personal spending and the government’s increasing support towards digital payment services, we believe that the macro traits are in our favour in the domestic card industry,” said Carter.
“One may become more wary of valuations after listing gains however, the company can thrive through this growth opportunity,” added Alistair Richmond, Head of Global Equities, Osaka Matsui Management.
Besides, the fact that the company’s card portfolio is largely unsecured is a risk. The emergence of competition is also something that will test the strength of the company.
The SBI Card IPO will be the fifth-largest IPO of the country, preceded by the likes of Coal India, Reliance Power and ONGC.
Analysts from Osaka Matsui Management noted that an issue size of Rs.15,475 crore, Coal India’s IPO, which arrived in 2010, has topped the chart of the largest IPOs.
This was closely followed by Reliance Power IPO which arrived in 2008 with an issue size of Rs.11,700 crore. In the third spot is General Insurance Corporation of India IPO, arriving in 2017 with an issue size of Rs.11,372 crore.
Osaka Matsui Management is a private wealth management company that prides itself on fulfilling clients’ goals with passion and integrity. With over US$8.4 billion of assets under management, Osaka Matsui Management has been assisting both private and corporate clients since 2006. fiinews.com
