Coronavirus fallout: SBI Card IPO may see lower-than-expected subscription

The much-talked about initial public offering of SBI Card could be marred by the coronavirus outbreak.

While the Rs 10,355-crore IPO has witnessed a good response so far, but the subscription levels are expected to be less than earlier estimates due to the prevailing weak sentiment on the Street.

"SBI Card IPO may get subscriptions less than expected earlier as investors are anticipating uncertainty over world equity markets. We expect 12-15 times of oversubscription, as QIB subscription may pick up which is lower till date. Investors are taking their own time to settle things and let market sentiment turn to positive, or at least neutral," Gaurav Garg, Head of Research at CapitalVia Global Research - Investment Advisor told Moneycontrol.

Prashanth Tapse, AVP Research, Mehta Equities also said, "Considering the market sentiment over Covid-19 virus, we believe SBI Card issue will be affected by the fears from coronavirus spread".

"Lower expectation is due to little room for gains under the HNI category after considering the cost of funding," he added.

Also read | SBI Cards IPO: 10 things to know about the keenly-eyed issue

He said the grey market premium has already fallen to Rs 105-120 per share as on date, down approximately 65 percent from its high few weeks back.

The grey market premium was around Rs 350-380 per share last week before the issue opened, but as number of deaths and infected people increased in India, the premium started falling sharply.

"Small retail investors are also worried if the carnage can hurt the prospects of the IPO as 35 percent of the issue size is reserved for small investors," Tapse said.

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The current grey market premium suggests the listing of SBI Card could be around Rs 850-900 versus earlier expetation of more than Rs 1,100 per share.

Although experts are upbeat on the country's second largest card issuer given the support from State Bank of India.

"The current fall in the market has affected the sentiment on the Street and therefore, the extent of oversubscription could be limited. This may restrict the listing gains for the stock. At the same time, we are upbeat on its long-term prospects," Ajit Mishra, VP Research at Religare Broking said.

Tapse expects subscription figures as follows - retail (1.5-2x times), shareholders (around 30x times), HNIs (around 50x times) and QIB (around 30x times).

"The recent drop in the market following the increasing spread of coronavirus has turned investors jittery and therefore few investors may wait for the stock to list on bourses and then buy for long term rather than placing their bids in the IPO," Garg said.