Virus Outbreak Could Dampen India's Blockbuster Listing
As SBI Cards started taking orders on Monday, investors are wondering how much the company's float can exceed its $1.4 billion target in the face of the coronavirus outbreak.
India's stocks fell for the seventh day amid the virus scare, and investors are wondering whether the blockbuster initial public offering (IPO) by SBI Cards and Payment Services can still exceed the valuation at the upper end of its price band. At 755 rupees apiece, the offering will fetch 103 billion rupees ($1.4 billion) and value the issuer at over 49 times the trailing 12-month earnings, the dearest among global peers including Visa and American Express.
«The subscription will be good but it will not be up to its true potential had it come three weeks ago. I’d rather buy it after the listing,» said Sameer Kalra, a strategist at Mumbai-based Target Investing, who was quoted in «Bloomberg» (behind paywall). Kalra said he would not buy at the initial public offering (IPO) due to high valuation and increasing competition from alternative digital payment platforms.
Biggest Sell-Offs
With global stock markets still reeling from one of the biggest sell-offs since the global financial crisis, further coronavirus-fueled declines in India may impact the IPO’s over-subscription rate, which in turn may limit the premium on the listing. As a reference, Indian Railway Catering & Tourism Corp.’s share sale in October attracted bids 112 times the IPO size, and the stock went on to list at double the offer price.
SBI Cards and Payment Services sale was 39 percent subscribed as of 5 p.m. in Mumbai on Monday, with bidding to continue until Thursday. SBI Cards is 74 percent owned by State Bank of India, the nation’s largest lender, and Carlyle Group has the remaining 26%. SBI is shaving a 4 percent stake, while Carlyle is selling 10 percent of its holding, according to the prospectus.
