Coronavirus scare affecting the markets:
On Monday (March 2, 2020), two cases of corona were reported in India at 2:50pm and markets crashed by 1000 points in next 15 minutes.
SBI Cards IPO will end on 5th march and shares will start trading on 16th march. If we see a surge in number of cases/deaths by coronavirus in these 10 days (March 6-15), it might lead to widespread panic and then stock might not give any/significant listing gains.
Without Coronavirus in scene, there was minimal risk for those who were looking at listing gains; but now, it has high risk.
Sentiments in grey markets
The grey market premium has halved in the past week. Quoting an EconomicTimes article:
“…fears of coronavirus reaching national capital have triggered panic in the unlisted market, and the grey market premiums of unlisted shares of SBI Cards has halved within a week… the premium on the counter, which was around Rs 380-390 a week ago, has plunged over 65 per cent to Rs 130-140 on Tuesday morning.”
Possibility of over-subscription or not?
In my humble opinion, IPO will be oversubscribed in all quotas (shareholder, retail, employee etc.) by tomorrow EOD. Why? Well, the deadline for HNIs and QIBs is today (March 4), so they will invest which will lead to higher subscription percentage today, leading to surge in retail investors’ subscriptions tomorrow.
Capital Protection for other investment avenues
Regardless of whether the IPO is over-subscribed or not, I am not planning to invest in this IPO now. The risk-reward ratio is very high now, much higher than it was 1-2 months ago and I would rather prioritize capital protection at the moment. I think that we can use this capital to invest in blue chip stocks instead (many are trading at 1 year lows); another 1 month of coronavirus scare, and the markets might drop to 2-3 year lows. so markets are ripe with similar/better deals (large cap stocks with 10-20 yr history).
Can I cancel my bid for IPO?
Have you already bid for SBI Cards IPO but want to cancel the bids? It’s easy, your broker or ASBA provider (i.e. usually a bank) should be able to help you to withdraw your application (e.g. Zerodha‘s documentation for the same). Once withdrawn, the blocked amount will be available in 1 working day.
Conclusion
If you are looking at listing gains, start speculating as it’s a betting game now.
But if you are in it for long term, a lot (or two) of this stock is still a long-term fundamental buy with good prospects. But anything more than that doesn’t makes a lot of sense in current scenario, because if the stock gets listed at a discount, you might be able to get SBI Card units at prices cheaper than Rs. 750-755 set for the IPO.