SBI Cards IPO | Multibagger: If grey market is telling the real story, here is your next multibagger

After getting a go-ahead from market regulator Sebi to float its initial public offering (IPO), SBI Cards and Payments Services’ stock is trading at a 40 per cent premium to the projected IPO price band in grey market.

The public offer is likely to hit the market in the first week of March.

Brokerage Edelweiss Securities in a report said the issue will open during March 2-5.

“We expect a price band of Rs 690-710 and the stock is trading at a premium of Rs 270-280,” says Abhishek Chaturvedi of Ulitmate Wealthowl, a firm that deals in unlisted shares.

Most market participants expect the issue to see strong oversubscription. And the grey market premium is expected to rise further in the runup to the issue.

“Once the actual price band is out, the premium is likely to rise. It may cross 50 per cent, if the price band is on the expected lines. However, if the price band comes close to Rs 1,000, the premium will remain in the current range,” he added.

About 10 per cent of the issue is going to be reserved for SBI shareholders.

“It would help if you are an existing shareholder of SBI, as the chances of allotment would increase in that case under this quota,” says Dinesh Gupta of UnlistedZone.

SBI shares have been trending higher over the past few sessions after taking a dip following dismal earning numbers for December quarter. The stock is up 22 per cent in last one year, but down 4 per cent year to date.

He said the company has been showing strong growth in last 4-5 years. “It is a long-term bet and one must go for it,” Gupta said.

SBI Cards is the second largest player in the Indian credit cards market with 18 per cent market share. Incorporated in 1998, the company is the subsidiary of India’s largest public sector lender, State Bank of India (SBI). SBI holds 76 per cent stake in SBI Cards while Carlyle Group holds the rest.

As per the DRHP, SBI Cards will offer up to 130,526,798 equity shares through the offer for sale route. This will include sale of up to 37,293,371 shares by SBI and up to 93,233,427 shares by Carlyle Group. In addition, the company will issue fresh equity shares worth Rs 500 crore.

“It will be a multibagger stock. If you get it, keep it in your portfolio forever. It is a must buy. The IPO will unlock its true value, which was seen in the case IRCTC, which was highly undervalued,” Chaturvedi said.