SBI Card IPO wipes up solid subscriptions gradually, unlisted shares of the company had crashed in the unofficial market for trading in such shares.
The 7 days losing streak of the secondary market and fears of coronavirus reaching national capital have triggered panic in the unlisted market, and the premium that the unlisted shares of SBI Cards and Payment Services (SBI Card) enjoyed has reduced within a week.
Dealers in the unlisted market said the premium on the counter, which was around Rs 380-390 a week ago, has dropped over 65% to Rs 130-140 on Tuesday morning. Premium at which the trades are actually taking bets is somewhat higher at Rs 180-190.
“After the coronavirus case found in Delhi, investors have pressed the panic button, which is affecting the SBI Card. Some traders are expecting a discounted listing as the market rally has come to a halt. From now onwards, anything can happen.” said Sagar Shah of Ascent Wealth Advisors.
Shah believes a recapture in the market may again push the premium higher. He felt SBI Card is a good business offering robust growth and said, “High growth stocks always tend to have a superior valuation.”
“In the secondary market, the latest bear grip has moistened sentiment on SBI Card. There is panic in the market. The subscription level will find out the premium of SBI Card, not the other way around (unlisted premium). It can rise if the issue is highly oversubscribed,” said Abhishek Chaturvedi of Ultimate Wealthowl, a brokerage that deals in unlisted shares.
As of 12 noon on Tuesday, the issue had received bids for 4,59,62,596 shares compared with the issue size of 10,02,79,411 shares. The quota reserved for retail individual investors has subscribed to 75% while the one for non-institutional investors was subscribed to 15%.
On the IPO, Prabhudas Lilladher has a ‘subscribe’ rating which values SBI Card at PEG of 1.2, lower than 1.3 PEG for American Express that has 58 million cards in an application and enjoys a market cap of $98 billion. The brokerage pegged the fair value of SBI Card stock at Rs 1,191.
Sustainability of higher business growth and strong return ratios justify the premium valuation for the business, said Mumbai brokerage ICICI Direct. Angel Broking, Nirmal Bang Securities, Geojit Financial Services, and Hem Securities, among others, have ‘subscribe’ ratings on the IPO.
