Caveat: this is not a paid post. I don’t invest in IPO.

There is a huge euphoria in the market about SBI Cards IPO. And this is true too – the demonetisation of 2016 has dramatically increased the demand for Electronic payments. So there is a demand for E payment like wallets, credit cards, U Pay, Paytm – and the biggest beneficiary is SBI cards.

As they go from urban India to rural India all that SBI is looking for is usage. If Amazon and Flipkart are any indicators, it is nice to see the huge usage. SBI is amazing in penetrating the credit card movement. Hdfc bank of course has a much larger quality of business. SBI must be having a larger reach, but a lower spend on the card. I do think that the following are true –

a) thanks to CIBIL the estimates about a potential client can’t be too wrong

b) Sbi knows how to use technology

c) In such a business political interference is not something to worry about

d) they get only 50% of their business from SBI, the remaining is from others

e) SBI cards will grow at a fantastic pace – not the %age but in absolute numbers

f) the usage of cards will dramatically go up

g) Sbi cards will be used to load wallets

Personally I will not buy a SBI card simply because I am not happy with the problem resolution mechanism. This is a good business, but for a stand alone Nbfc the cost of funds is higher than that of a bank. Having said that it is still a good business.

Even though a lot of people will use the credit card for the credit facility, do remember that an Nbfc can lend money to the merchant institutions – and make a killing in this business. So many transactors will become borrowers for a few days of a a year.

I do think that the fee income, and interest income will go up.

I do think that the IPO will be a huge success. I do think there could be some money to be made in the long run.

I am not keen on a Nbfc – and I do not like IPO.

You need to take your own call. I will not regret even if it opens at a premium.