SBI Cards shares list below issue price, dash listing gain hopes; should you buy or sell now?

SBI Cards and Payment Services Ltd shares listed on the stock exchanges on Monday, and contrary to the expectations, opened down 13 per cent from the IPO price. SBI Cards shares began trading at Rs 658 per share, against the IPO issue price of Rs 755. The expectations seemed too heavy for SBI Cards to carry on its shoulders amid the global equity market sell off. The fifth-largest initial public offer (IPO) ever in the Indian markets opened on a day when S&P BSE Sensex tanked close to 2,000 points on opening and the broader NSE Nifty-50 slipped the 9,500 mark.

However, analysts are not seeing the slip-up by SBI Cards as a trigger to sell the stake. It is on the contrary an opportunity to accumulate, say analysts. “The fear in equity markets is dominating the headlines because of fear of Coronavirus and global sell-off but it is a quality stock and we think it is a must have in your portfolio,” Sanjeev Bhasin, Director, IIFL Securities told Financial Express Online. Bhasin thinks that SBI Cards is bound to perform better in the next few weeks and “extremely well” in the next three to five years.

SBI Cards and Payment Services, after opening at a price of Rs 658, jumped to trade as high as Rs 735 but remained lower than the upper band of the issue price — Rs 755. Shares were allotted last week after subscription ended on March 5, 2020. The four-day bidding process saw investors oversubscribe the issue 26 times, beating market sentiment.

If you are looking to invest for a long term then SBI Cards and Payment Services could be the stock that you are looking for, as analysts believe that the performance will be better in the next few years. “I would say that even the worst of times have an opportunity and here the opportunity is for those who stayed away from the IPO or were not allotted the shares during the process. Accumulate in small quantities,” said Milan Vaishnav, Consulting Technical Analyst, Gemstone Equity Research & Advisory Services. Vaishnav sees the discounted opening as an opportunity for investors who are looking to invest for a longer period.

The market expectation from SBI Cards turned awry last week when markets witnessed sell-off aided by fear of Coronavirus and the bail-out plan of Yes Bank. “The IPO was priced in my opinion at a very rich valuation,” Ajay Bodke, CEO PMS Prabhudas Lilladher told Financial Express Online. Bodke added that amidst a weak market sentiment where a consumption slowdown is expected, the credit card industry is a risky bet. “Credit cards have a high-risk matrix and the first thing people default on is their credit cards. People are worried about the precipitous decline in demand right now and credit cards depend on consumption. If spends come down on credit cards, then there will be a break for the next couple of quarters till sentiment revives,” Bodke added while listing the risks aligned with the industry. 

Saying that SBI Cards and Payment Services was priced to perfection, Bodke said it was wrong to even compare SBI Cards with IRCTC and Avenue Supermarts. “In both IRCTC and Avenue Supermarts, the pricing was such that a lot of money was kept on the table for investors, IPOs were priced very attractively. When it comes to SBI Cards, it is priced to perfection. In the current market situation, the kind of reaction we are seeing is not unexpected at all,” he added. Independent investment advisor, Sandip Sabharwal told Financial Express Online that SBI cards “should be in Value zone at around Rs 600.”

Prior to last week, which is when S&P BSE Sensex and NSE Nifty-50 tanked more than 11 per cent. The 49 per cent stake of Yes Bank that State Bank of India is picking up has also kept investors on the edge. SBI Cards IPO ended the day at Rs 683 per share jumping up from its listing price but still failing to reach the issue price of Rs 755.