SBI Card and Payment Services Limited which had tapped the capital markets with its fresh issue of Rs 500 crs and an offer for sale of 13,05,26,798 equity shares was subscribed 26.49 times. The oversubscription was far below expectations and left a sour taste in the minds of over 18.54 lac shareholders of the parent company State Bank of India. The company had earlier completed allocation to anchor investors. The price band of the issue is Rs 750-755. The company allotted 3,66,69,589 equity shares to 74 anchor investors which included 12 mutual funds who were allotted shares in 48 schemes.

The highest allocation was made to HDFC Mutual Fund who has been allotted 20.53 lac shares. The top seven anchor investors have been allotted about 40% of the anchor book. This is an extremely fair and well distributed anchor allocation and is not skewed in any manner as has been seen in many other issues.

The issue had opened on Monday the 2nd of March and closed on Wednesday the 3rd of March for QIB investors. It closed on Thursday the 4th of March for all other investors which include HNI’s, Retail, Employee and Shareholders.

Coming to the issue subscription, the QIB portion was subscribed 56.66 times, HNI portion 45.24 times, Retail 2.50 times, Shareholder portion 25.36 times and Employee portion 4.74 times. This is probably the first time in a well-received issue that the HNI leveraged subscription is below the QIB portion. It maybe of relevance to state that almost the entire HNI portion is on leveraged funds while QIB portion is from own funds.

The issue was eagerly awaited and was expected to be a hot selling one. The issue belied expectations and the response seemed to have abated. What happened or what was the reason? It was the greed and ill-advice of the battery of merchant bankers to the company. The public shareholding of State Bank of India who is the promoter of the company was 14.94 lac shareholders as of 30th September 2019. This rose to 18.54 lacs in the subsequent quarter ending 31st December 2019. The same rose by another one lac shareholders or thereabouts on the record date of RHP on 18th February 2020. This bucket of shareholders had a reservation of 1.30 cr shares.

The merchant bankers cited the case of SBI Life when the shareholder portion was not subscribed. What they did not mention is the fact that at that time the HNI portion itself remained undersubscribed and therefore the question of the shareholder portion getting subscribed did not arise. Life Insurance business was hardly understood in September 2017, and the HNI portion was subscribed 0.70 times, Retail 0.85 times and Shareholder portion a mere 0.38 times. QIB portion was subscribed 12.56 times.

While people may argue that grey market machinations hit sentiment and so did covid-19, why did it affect only shareholder portion and not the retail portion? It is the greed factor. It was believed that the demand in this issue for funds would be in the region of 1.10-1.15 lac crs and accordingly they did this split in HNI and Shareholder. The thought process is that demand would increase and financers would make a killing. Man proposes and God disposes. While through commercial paper, finance was raised, demand fell looking at the rate of interest and assuming that the entire money raised through shareholder is added to the HNI category, the total comes to 87,000 crs well short of base expectation.

Shareholder enthusiasm was killed and the bucket hijacked by a handful of HNI investors. The issuer of capital was misguided by the merchant bankers.

Well the proof of the pudding is in the eating. The share is expected to list on Monday the 16th of March and its performance will be tracked by a large number of investors, bankers and the capital market.