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Why & How to Invest in SBI Credit Card IPO: Analyst Review & Details



SBI Credit Card IPO Details (1)

The initial public offer (IPO) of India’s second largest credit card supplier SBI Cards and Payment Services will open on 2nd March 2020.

Yes, SBI Cards is going to rise about Rs 10,000 crore through this IPO by divesting its 4% stake in which SBI holds 74% stake while remaining 26% is owned by Carlyle Group that will sell 10% of its stake. Carlyle bought the stake in 2017 from GE.

The IPO which will open on 2nd March and close on 5th March priced in the band of Rs 750-755  comprises issue of fresh equity shares aggregating to Rs 500 crore and an offer for sale of nearly 13 crore shares. SBI and Carlyle Group will offload 3.73 crore shares and 9.32 crore shares respectively.

SBI Credit Cards Business Overview

Over the past few years the credit card business in India has increased tremendously with further scope and opportunities for suppliers.

As per the industry reports Credit Card spends in the country increased by 32% annually to Rs 6.1 trillion between FY15 and FY19 according to RBI and CRISIL following rising awareness of digital payments. The proportion of digital transactions increased to 62% in FY19 from 25%  in FY14.

And after HDFC Bank, SBI Cards is second-largest credit card issuer in India, with 18% market share in terms of the number of credit cards. And with 10 million cards in force and Rs 98,500 crore in card spends in the nine months to Dec 2019.

Also Read: How to Get Lifetime Free Credit Card?

It is operating through multiple channels and outlets. Nearly half the cards are issued using distribution channels of SBI and other banks while the remaining are through its customer acquisition network across 145 Indian cities.

SBI Credit Cards Financial Performance

In terms of financials, the company’s revenue from operations increased from ₹3,346 crore in fiscal 2017 to ₹6,999 crore in fiscal 2019 at a CAGR of 44.6%. The net profit in same period increased from ₹372 crore to ₹862 at a CAGR of 52.1%. Its return on equity (RoE) has remained above 28 % since FY17 giving an interesting returns.

How Do Credit Card Companies Make Money: Graphic

Apart from making the transaction charges from customers as well as merchants, credit card companies earn from following sources:

  • Interest on EMIs.
  • ATM Withdrawal Charges.
  • Cash on Call.
  • Late payment fees.
  • EMI on Cash on Call.
  • Fees convert to EMIs
  • Annual payment charges.
  • Transaction costs of any of the above charges.

Credit Card Penetrations in India vs Top Countries:

Credit card penetrations in India is very-very low just 3% compare developed nations like 320% in US,  214% in Japan, 94% in UK and far below than developing nations like China (42%) and Brazil (73%), implies too much scope for leading companies like SBI credit card to penetrate the untapped cities and acquire more customers.  

In past 4 year new credit card issuance has increased 10 times to 10% among customers below the age of 25 years young working population.

Annual Credit Card Spending in India

Presently HDFC bank is market leader with 1.25 Crore outstanding followed by SBI cards with 83 Lacs outstanding cards.

Credit Card Market Insights & Growth Scenario

  • HDFC is the market leader in No of card outstanding as well as average spends and outstanding while SBI cards is second largest player with market share of 18%.
  • 5 Year CAGR of no of cards is 23% while credit cards spend is 44%.
  • Asset quality is stable with gross NPA of 2.5% as on March 19.
  • SBI cards has co- branded cards with IRCTC, BPCL, OLA, Air India and Apollo Hospital
  • Receivables as on 30st Sep 2019 is 23038 Crore.
  • Average yield is about 21% and NIM is about 15%.
  • ROA is 4 to 4.8%.

Other Growth Factors:

  1. E-commerce industry in India is growing with a pace of 32% CAGR in past 5 year and is expected to grow at 25% CAGR over next 5 year.
  2. E-com industry size was INR 713 bn. In FY14 in FY19 it reaches to INR 3000+ bn and expected to cross INR 9000 bn by FY24. Since Most of the E com companies started accepting Cards payment in COD (cash on delivery) Cards spends likely to be increased.
  3. Median age of India is 28 years new credit card origination has shown highest growth in age group of 20-30 years.
  4. Organized retail penetration (including E-com) is just 11% and is expected to be about 15% by FY24.
  5. With deeper penetration of payment network of PayTM and PhonePay and credit card spends are increasing.
  6. Promoter advantage, about 70% of the customers sourcing done by SBI.

SBI Credit Card IPO Risk Factors

Although, owing to digitalization, competition from prepaid instruments such as e-wallets and UPI service is rising though they are mainly used for small transactions and do not offer credit period or benefit of reward points unlike credit cards.

And SBI Cards has adopted technologies to offer virtual cards on various mobile platforms thereby improving its appeal to tech savvy young generation. Economic slowdown affecting discretionary spend is another major risk. However, so far, the company has not experienced any slowdown in either card issuance or card spending.

Annual Card Spending in India Slowing Down

Yet only about 5% of Indians’ consumption per capita takes place through credit cards. After growing 12% annually over four years, average spending per card is stalling. While a slowdown is only to be expected given a sharp decline in economic momentum, the reason has more to do with the merchant than the spender.

Presently there is a cap on interchange fees on debit card any regulation on limiting interchange fees on credit card will adversely affect the performance of the company. Presently 21% of the total revenue comes from Interchange fees.

More than half of the income comes from interest on outstanding ( Revolving and EMI loan) any Regulatory change capping the interest rate will adversely affect the company. And slowdown in economy especially BPO and IT space leads to bulk of default. Earlier Barclays has shut down their credit card business due to economic slowdown, as most of credit card customers are working in private sectors with risk of job loss.

Analysts View on SBI Card IPO

As per the best stock broker in India and most of the securities firms remains positive on this IPO, citing many factors: Low free-float, first credit cards/payments company to get listed (only proxy to the fast-growing digital payments space), the company is the second largest credit card issuer with 18% market share in cards outstanding and spends and demonstrated faster business growth than industry.

Why and How to Invest in SBI Card IPO?

As, the financials and operating performance of the company is very encouraging and carrying many advantages like having second largest leadership in the credit card market, demonstrated track record of growth and profitability.

It has diversified customer acquisition capabilities, advanced risk management and data analytics capabilities with modern and scalable technology infrastructure to analyze the industry growth, scope and other scenario timely.

In my view you can subscribe to this IPO and gain 20-25% returns on the listing day and from long term investment point of view, you can also try in IPO or buy from the stock market after few days, when it will correct after listing gains.  

So, open online demat account now to invest in IPO. And I suggest you to bid at least 5 shares to get the allotment, as there is huge demand of this shares in the grey as well as primary market and the whole IPO will be oversubscribed many times.  

SBI Credit Card IPO Details:

Issue Open Date On 2nd March 2020
Issue Close Date On 5th March 2020
Issue SizeRs 10,290 Cr – 10,355 Cr
Price BandRs 750-755
Bid Lot Size19 Shares (there after in multiples)
Fresh Issue Rs 5000 million
Offer For Sale 130,526,798
Investors Portion QIB = 50% NII = 15% & Retail = 35% of the offer.
Employees Reservation Portion Up to 1,864,669 Equity Shares
Shareholders Reservation Portion Up to 13,052,680 Equity Shares.
Tentative Listing Date16 March 2020

Also Watch: SBI Cards IPO – Fundamental Analysis Video

Disclaimer: The views and investment tips expressed by investment expert on VSINGHBISEN.COM are his own and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.

Sources: SBI Credit Card DRHP, SEBI & Livemint

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Stock Market

How Sentiment Analysis in Stock Market Used for Right Prediction?



Social Media Contents Based Sentiment Analysis and Prediction System

The stock market is one of the most sensitive fields, where sentiments of the people can change the trend of the entire market. Actually, there are many factors, affect the movement of the stock market and, the sentiments of the traders are also one of them drive the market.

At the present time, stock market investment plays an inevitable role in the finance sector, as high stock market value is considered as the parameter of high economies. The volatile nature of the stock market has equal chances for earning money and losing money as well. But if the situation can be predicted, investors can make a profit or minimize their losses. 

Hence, AI companies are now using sentiment analysis in the stock market to predict the market trend or movement of a particular stock. And social media is one of the best platforms to understand the sentiments of the people trading or investing in the stock market or other financial instruments that are traded on the various exchanges.

What is Sentiment Analysis and How it Works?

Sentiment analysis is basically the process of analyzing the sentiments of people through various platforms like social media and similar websites, where people can freely express their feelings and opinions about anything they think.  

What is Sentiment Analysis and How it Works

And classification of such sentiments can be done at the phrase level, sentence level, and document level. The sentiment analysis uses Natural Language Processing (NLP) to divide the language units into three categories: Negative, Positive and Neutral.

Sentiment Analysis in Social Media

Facebook, Twitter, and Linkedin are the leading social media networking sites, where people share their opinions and express their feelings that show their sentiments. Here people also discuss what they think whether they are experts in that field or not. 

sentiment analysis stock market

And access to social media platforms through portable devices like smartphones is making easier for the people to post the contents and spread their views on various topics. And here sensitive news including fake news or rumors also spread at a very fast pace

Such news or information influences the people around the globe and if the news is from the stock market, investors will be also influenced and they will take the decision of buying or selling of stock accordingly, that will have a positive or negative impact on the price of the stocks trading on exchanges.

How Sentiments Analysis Used in Stock Market Prediction?

Actually, sentiment analysis and the stock market is a well-researched problem. As there are already lots of forces behind the movement of the stock market or particular share of a company. Maybe due to negative sentiment, the stock price goes down or if there is any positive sentiments the stock prices increased because of this optimistic sentiments.

sentiment analysis stock market predicition

Although, there is no single technique to predict the stock movement accurately, so researchers have done lots of experiments to get better results. But due to the universal use of social media websites, they can be considered as important in the prediction of stock movements, as investors share their opinions and thoughts in the media.

And when you analyze such social media platforms or microblogging websites using sentiment analysis you can get some idea what people are talking about and what they think about a particular stock. The contents of Social Media such as posts, tweets, photos are analyzed by people of different communities such as politicians, marketers, and analysts, etc, to make the right decision while investing in such markets.

Social Media Contents Based for Real-Time Sentiment Analysis in Stock Market Predictions

Social media is playing a key role in sentiment analysis on the stock market. Even, over the past few years, the influence of social media sites on everyday life has become so large that even information on large and small incidents or disasters is obtained through social media sites.

And due to the influence social ripple effect of social media sites, diverse studies are in progress to analyze the contents generated online. Social media content analyses are conducted in diverse methods, and for diverse purposes.

Among several contents, especially those texts that are firsthand written by the users contain the most direct and important information. Since contents are created according to the user’s intentions the time of creation time also becomes an important factor in social media contents based on real-time sentiment analysis in stock prediction.

In the current era, the internet user’s popularity has grown fast equivalent to emerging technologies; that actively use online review sites, social networks and personal blogs to express their opinions. And this provides an opportunity to know the positive and negative attitudes about people, organizations, places, events, and ideas.

The tools provided by natural language processing and machine learning along with other approaches to work with large volumes of text make it possible to begin extracting sentiments from social media.

Social Media Impact on the Stock Market

As we can see that in the modern world, people make judgments about the world around them when they are living in the society. They make positive and negative attitudes about people, products, places and events. These types of attitudes can be considered as sentiments.

social media impact on stock market

Sentiment analysis is the study of automated techniques for extracting sentiments from written languages. The growth of social media has resulted in an explosion of publicly available, user-generated content moderation service to control such contents.

While such data and information can potentially be utilized to provide real-time insights into the sentiments of people. Blogs, online forums, comment sections on media sites and social networking sites such as Facebook and Twitter all can be considered as social media that can capture millions of peoples’ views or word of mouth.

Hence, communication and the availability of real-time opinions from people around the world make a revolution in computational linguistics and social network analysis. And with time being, social media is becoming an increasingly more important source of information for anyone including investors trading in the stock markets.

Actually, when a piece of news comes in the market, people start talking about and give their positive or negative opinions that show their sentiments. That can be used by the sentiment analysis experts to predict the movement of the stock market or particular stock of a company.

While on the other hand people are more willing and happy to share the facts about their lives, knowledge, experiences, and thoughts with the entire world through social media more than before any platform of media sources.

Twitter Sentiment Analysis Machine Learning for Stock Prediction

The sentiment analysis task is very much field-specific. Tweets are classified as positive, negative, and neutral based on the sentiment present. Out of the total tweets are examined by humans and annotated as 1 for Positive, 0 for Neutral and 2 for Negative emotions. For the classification of nonhuman annotated tweets, a machine learning model is trained whose features are extracted from the human-annotated tweets.

twitter sentiment analysis machine learning

Such data is extracted from twitter and various other similar platforms, and then used a training data set to train the AI model through sentiment analysis algorithms to predict the price of stocks in different scenarios. Except, in extreme or unexpected conditions, most of the time, machine learning or deep learning-based models predict at very high accuracy helping stock market investors to earn money.    


They actively participate in events by expressing their opinions and stating their comments that take place in society. This way of sharing their knowledge and emotions with society and social media drives the businesses to collect more information about their companies, products and to know how reputed they are among the people and thereby make decisions to go on with their businesses effectively.

To understand the sentiments of people you need an expert, Cogito is providing the sentiment analysis services for the business enterprises, companies and organizations to understand their customers and offer them the most suitable product or services for better response.

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