The next 12 to 18 months could see bonanza capital market issuances from the State Bank of India. Dinesh Khara, Chairman of State Bank of India, speaking exclusively to businessline, indicated that the listing of SBI Payments Limited and SBI General Insurance Company Limited may hit the street.

While he did not indicate any specific timelines for listing, sources in the industry say talks of an initial public offering for the two businesses have been ongoing in recent months.

Explaining the logic for listing payments and general insurance business, instead of the earlier talked-about listing of the asset management company, Khara said, “The listing of a subsidiary is a function of the capital structure. A mutual funds company needs knowledge capital (over equity) and I think they have done well for themselves. But those which are capital-heavy, like general insurance, at some stage we will think of listing and SBI Payments is another option”.

Valuation of SBI Payments is pegged at around ₹45,000 crore, while that of the general insurance arm is seen at ₹30,000 crore.

Massive value unlocking

Sources in the payments and fintech industry say that if SBI manages to list its payments business in the next 18 to 24 months, it could result in massive value unlocking for the bank. “It is among the largest player in the merchant space and among the very few which generates profits,” said a CEO of a leading payments company.

In FY23, SBI Payments Limited reported a net profit of ₹159 crore, whereas according to reports, fintech major Pine Labs reported a net loss of ₹56 crore that year. With this level of profitability and merchant network, experts say SBI Payments could be a $4 to $5 billion opportunity for the bank.

Focused on merchant acquiring business, SBI Payments Limited is among the newest subsidiaries of the bank. Incorporated in 2019 as a joint venture with Hitachi Payments Services Private Limited, the bank holds a 74 per cent stake in the payments business and the rest is held by the JV partner, which was earlier known as Prizm Payments Services, and was acquired by Japan’s Hitachi in 2014.

SBI Payments had 2.93 million merchant payment acceptance touchpoints and over 1.14 million POS or point of sales machines as on March 31, 2023.

The general Insurance arm, on the other hand, is an older business for the SBI group. The listing of this arm was first planned in 2019 but was called off within two years due to weak market conditions.

SBI holds 69.95 per cent in the general insurance business, while the rest is held by global and domestic private equity investors. In FY23, the company generated a net profit of ₹184 crore and a total gross written premium of ₹10,888 crore.