Shares of SBI Cards could become a casualty of overall bearish mood in the stock market and even fall below their issue price of Rs 755 on Monday, said traders active in the grey market.
Sources told CNBC-TV18 that SBI Cards shares were quoting at a discount of Rs 50 to the issue price, indicating a weak opening. While the grey market rates are unofficial and negotiated outside of the stock exchange mechanism, they do give a fair idea of the sentiment for the stock.
Till a couple of weeks back, grey market rates for SBI Cards were quoting at a premium of around Rs 350 to the issue price, indicating strong demand for the offering. That premium had been steadily coming off as markets globally, India included, went into a tailspin amid panic over the coronavirus pandemic.
SBI Cards IPO had seen a strong response from qualified institutional buyers and high net worth individuals. In all, the issue was subscribed a little over 26 times. The QIB portion of the book was subscribed 57 times and the HNI portion 44 times.
While the market trend was bearish at the time when the issue was open for subscription, the sentiment has dramatically worsened over the last few days. Usually, strong subscription numbers indicate that many who were not allotted shares in the IPO or did not get their desired quantity of shares will buy on the stock exchange when the stock lists.
But strong follow up buying from both institutions and HNIs seems doubtful. In particular, HNIs who subscribe to IPOs on borrowed funds are already staring at a loss in the SBI Cards IPO because their cost of borrowing will not be covered unless the shares list at a significant premium to the issue price. An overwhelming majority of the HNIs participate in IPOs with the sole intention of listing gains and sell their shares as soon as the stock lists.
Many HNIs have lost money during this week’s stock market meltdown and so would be focussing on conserving capital. Institutional investors too are likely to be cautious given the flux in markets worldwide.
The situation is reminiscent of the high profile IPO of Reliance Power in 2008, which had generated a lot of buzz but collapsed below the issue price on a listing day because of the panicky mood in global markets.