As fear of a recession looms large, investors are puzzled whether to stay invested in the second-largest credit card issuer in the country or to wash their hands off the scrip.
Investors braved the jittery markets last week when they oversubscribed the SBI Cards and Payment Services initial public offer (IPO) 26 times. Not just institutional investors, but SBI employees and retail investors too didn’t seem to care much about how the share markets were performing when they bid for SBI Cards IPO — all of them oversubscribing the issue. However, since the last day of bidding for the SBI Cards IPO, S&P BSE Sensex and NSE Nifty 50 have tanked close to 15 per cent. Coronavirus has been declared a pandemic and deaths across the globe due to the virus have spiked. Now, what should investors who were allotted SBI Cards shares in IPO do on the listing day? Here’s what analysts say.
“I am personally expecting the market to bottom out in a day or two. So on listing day if it opens at a discount, one should hold it for some time, gains of 15-20 per cent in the next couple of weeks cannot be ignored,” Vishal Wagh, Research Head of Bonanza Portfolio told Financial Express Online. However, he added that if by any chance SBI Cards opens with gains of 25 per cent or more, investors should book profits. SBI Cards shares were allotted at Rs 755, the upper end of the IPO price. A 25% gain would require the shares to hit Rs 944.
SBI Cards, the fifth largest IPO to enter the Indian market, pocketed more than Rs 2 lakh crore at the end of the four-day bidding process as analysts went all-out to recommend investors to subscribe. With the changed sentiment and the carnage in the stock markets, SBI Cards listing may be a little muted than that expected earlier. “In my view, the listing of SBI Cards will be definitely hit by the prevailing market conditions that remain one of its worst in recent history. That being said, the investors will have to be ready with lower-than-expected listing gains on the stock,” said Milan Vaishnav, Consulting Technical Analyst, Gemstone Equity Research & Advisory Services.
Both Wagh and Vaishnav expect the stock to turn profitable in the medium-term even if it fails to perform as good as expected on listing day. Vaishnav thinks that if the price of the stock falls below the issue price, even those who earlier stayed away should jump in to buy SBI Cards. The market sentiment has changed aided by Coronavirus and even the bail-out of cash-starved lender Yes Bank by State Bank of India — promoter of SBI Cards.
Grey market trading hints that SBI Cards might not turn out to be the shining star that everyone once hoped it would. “The grey market premium for the IPO of SBI Cards has seen a sharp drop from 350 levels to 35 levels (on Wednesday) which clearly points towards a muted listing in the range of 800-850,” said S Ranganathan, Head of Research, LKP Securities. Prior to the bidding process, LKP Securities pegged a 62 per cent upside to SBI Cards shares over the IPO price.
SBI Cards shares were allotted to investors last week when the markets recorded their worst fall in a single day. As fear of a recession looms large, investors are puzzled whether to stay invested in the second-largest credit card issuer in the country or to wash their hands off the scrip.