SBI Card dips 4% after over 40 million shares change hands via block deal

Shares of SBI Cards and Payment Services declined up to 4.4 per cent to Rs 977 on the BSE in the intra-day trade on Wednesday after over 40 million equity shares changed hands via block deal.

At 09:15 am, around 41.89 million equity shares, representing 4.5 per cent of total equity of SBI Cards and Payment Services, changed hands on the counter on the BSE, exchange data shows. The names of the buyers and sellers, howver, could not be ascertained immediately.

According to reports, US private equity fund CA Rover Holdings, an affiliate of Carlyle Asia Partners, is looking to sell 4 per cent stake in SBI Cards and Payment Services worth $514 million or Rs 3,728 crore through a block deal. The sale price has been fixed at Rs 981.80-1,022.10 apiece, down 3.9 per cent than Tuesday's closing price of Rs 1,022.

CA Rover Holdings held 15.86 per cent stake in the Indian credit card company as on December 31, 2020, the shareholding pattern data shows.

At 09:35 am, SBI Cards trimmed losses marginally and was down 3.6 per cent at Rs 985 on the BSE, as against a 0.17 per cent rise in the S&P BSE Sensex. A combined 59.95 million equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.

Meanwhile, Morgan Stanley has initiated coverage on SBI Card with a target price of Rs 1,300. According to the brokerage house, SBI Card is a pure play on the unsecured consumer finance opportunity in India. With a strong parentage, State Bank of India (SBI), it is a differentiating factor as far as SBI Card is concerned.

"We think the key catalyst for re-rating will have to be year-after-year reduction in credit costs, articulation of innovations, as well as defense mechanisms against fintechs. Reasons for de-rating are more likely to be a rise in credit costs or subdued growth," the foreign brokerage said in report.

SBI Cards has demonstrated a strong track record in growing its cards book/earnings. This has enabled it to strengthen its lead as the second largest card player in terms of both outstanding cards and spends. The company has delivered average RoA/RoE of around 5 per cent/29.5 per cent over FY18–20.

Those at Motilal Oswal Financial Services, howver, expect a loan book/earnings CAGR of 27 per cent/47 per cent over FY21–23E, while margins could remain broadly stable. "Asset quality is likely to remain under pressure with a higher proportion of the book under restructuring. Therefore, credit cost is likely to remain elevated in the near term and moderate from FY23," the brokerage said in a initiation coverage report (Neutral rating; target price of Rs 1,200). Analysts estimate the company to report healthy return ratios with RoA/RoE of 6.6 per cent/28.4 per cent in FY23.