FRONT STORY ASIA-PACIFICSBI Cards’ weak debut outperforms market
India’s second-largest credit card company falls 9.7% on first day
SBI CARDS AND PAYMENT SERVICES made a weak debut
last week, though its shares held up better than
expected as coronavirus fears weighed on
India’s biggest listing in recent years.
The shares of India’s second-largest credit
card company in terms of users closed at
2Sû-ONDAYûONûTHEIRûlRSTûDAYûOFû
trading, down 9.7% from the IPO price of
Rs755, and have traded in a Rs696–Rs769
range since then.
While it may be some consolation for
issue managers and investors that the
performance could have been worse,
analysts said the poor showing will keep
away potential issuers. ROSSARI BIOTECH and
BURGER KING INDIA have both deferred their
Rs7bn and Rs10bn (US$93m and US$133m)
mOATSûORIGINALLYûPLANNEDûFORû-ARCH
Subhrajit Roy, head of ECM origination at
Kotak Mahindra Capital, said it was not a
bad outcome given how markets have fared.
The benchmark S&P BSE Sensex has fallen
38% since March 5 when the SBI Cards IPO
closed for subscription.
“At a time when even the blue chip
companies are falling 5%–10% in each session
and in a market that has dropped over 20%
since the IPO, a listing day close at a 10%
discount is not a cause for panic. The stock hascontinued to trade within a tight 5% discount
to the IPO price, highlighting the underlying
resilience despite volatile markets.”
The Rs103bn (US$1.4bn) IPO was India’s
biggest since General Insurance Corp of
India’s Rs114bn issue in 2017 and was
subscribed 26.54 times despite volatile
MARKETûCONDITIONSû4HEûQUALIlEDûINSTITUTIONALû
investor tranche was covered 57.18 times, the
highest such coverage in over a decade, the
high net-worth investor tranche 45.23 times
and the retail tranche 2.5 times.
Market participants said some state-owned
domestic institutions are likely to have
supported the shares at lower levels. However,
high net-worth investors who borrowed at
rates of 12%–14% to buy on margin are likely
to look at exiting when the shares rise.
Roy said he does not believe there has been
any panic selling though. “The high delivery
percentages indicate short sellers haven’t
beaten the stock at lower levels,” he said.LOCKDOWN HITS BUSINESS
In the near term, the credit card company is
likely to be hurt as consumer spending will
be curtailed by the closure of malls and
theatres, and there will be a drastic
reduction in air travel and internal tourism.As of Friday, 177 coronavirus cases had
been reported in India with four deaths, and
local governments have imposed strict
restrictions on the movement of people to
contain the spread of the virus.
Anindita Chaudhury, deputy manager at
broking house Anand Rathi, said SBI Cards’
share price is likely to rise when there is a
broad market recovery.
“SBI Cards has a strong potential to grow as
India’s credit card market is under-penetrated.
We are hoping the current downturn won’t
last too long.” Chaudhury had recommended
that investors buy the SBI Cards IPO.
This is the second weak listing from a
State Bank of India subsidiary. SBI Life
)NSURANCEûWASûmOATEDûINûAû2SBNû)0/ûINû
2017 and still trades below the IPO price
after it staged a brief recovery last year. The
shares traded at Rs640.85 on Friday versus
the IPO price of Rs700.
SBI Cards is a joint venture between State
Bank of India (76%) and global private equity
lRMû#ARLYLEû'ROUPû
Axis Bank, Bank of America, HSBC, Kotak, Nomura
and SBI Capital were the lead managers.
Coal India’s Rs155bn IPO in 2010 remains
the country’s largest to-date.
Anuradha SubramanyanDrug industry rises to coronavirus challenge
FDA speeds up approvals for emergency drugs
Biotechnology stocks surged last week on
moves by the Trump administration to
expedite approval of repurposed treatments
for the coronavirus, pointing to a more
lenient regulatory environment for drug
development going forward.
The Nasdaq Biotechnology Index gained
2.7% on Thursday to 3,174.16, outperforming
the broader stock market
More than 245,049 cases of the coronavirus
have been reported globally, resulting in 10,028
deaths, according to Reuters. This includes
12,296 cases reported in the US with 202 deaths.
President Trump mistakenly told
reporters on Thursday that the US Food and
Drug Administration had approved
chloroquine, a generic drug used to treat
malaria, for patients with coronavirus.The Food and Drug Administration quickly
walked back the President’s claim in a
statement that said, “studies are under way
TOûDETERMINEûCHLOROQUINESûEFlCACYûAGAINSTû
the virus”.
The FDA fast-tracked development of
another potential drug, remdesivir, earlier
this month.
The clearer answer would be to simply
develop a vaccine against the coronavirus.
MODERNA and BIONTECH, two recent IPOs, are
at least a year away from delivering a
potential vaccine.
Moderna, which raised US$575m in a
follow-on stock sale last month after gaining
lNANCIALûSUPPORTûFROMûTHEû.ATIONALû)NSTITUTEû
OFû(EALTH ûDOSEDûTHEûlRSTûPATIENTûINûAû0HASEû)û
trial last week.BioNTech, a German biotech, struck a
COLLABORATIVEûPARTNERSHIPûWITHû0lZERûLASTû
week to expedite development of a potential
vaccine that uses its messenger RNA drug
technology.
That agreement is part of a three-way global
PARTNERSHIPûBETWEENû"IO.4ECH û0lZERûANDû
Fosun Pharma that will run concurrent drug
trials in Europe, the US and China. They expect
to launch the Phase I trials by the end of April.
The lengthy development time-lines may
be too long, and too risky, for some investors.
Moderna shares fell by 10.5% on Thursday
to US$28.27 and those of BioNTech by 35.5%
to US$59.30, reversing recent gains when a
potential resolution to the coronavirus
pandemic was less evident.
Robert SherwoodInternational Financing Review March 21 2020 73EQUITIES
Cambodia 74 China 74 India 76 Philippines 76 Austria 76 Norway 77
Sweden 77 Switzerland 77 UK 77 United States 7810 IFR Equities and SE 2325 p 73 - 81 .indd 73 20 / 03 / 2020 19 : 37 : 35