Elara upgrades SBI Cards to 'Accumulate,' lifts TP to ₹1,006 on turnaround

Analysts believe the worst of stress cycle is over & that SBI Cards is entering final phase of its balance sheet cleanup, setting the stage for a recovery in credit costs, CIF growth & return ratios.

Elara Capital on SBI Cards: Domestic brokerage Elara Capital has upgraded SBI Cards and Payment Services stock to ‘Accumulate’ and raised its target price to ₹1,006, on the back of  a clear turnaround in asset quality, an improving balance sheet, and visibility on stronger profitability from FY27 onward.   “As balance sheet cleanup wraps up, spends growth becomes certain, and cards-in-force acceleration nears, we upgrade to Accumulate from Reduce,” said Shweta Daptardar of Elara Capital, in a note dated November 18, 2025.

 

Elara Capital analysts believe the worst of the stress cycle is over and that SBI Cards is entering the final phase of its balance sheet cleanup, setting the stage for a recovery in credit costs, cards-in-force (CIF) growth and return ratios.

 

The upgrade marks a reversal from Q4FY25, when Elara had cut the SBI Cards stock to ‘Reduce’ amid concerns over muted receivables growth of 10-12 per cent, tepid CIF additions of under one million per quarter and elevated credit costs of 9 per cent. These pressures dragged FY25 return on assets (ROA) down to 3.1 per cent, well below the FY19-24 average of 5 per cent, prompting caution at the time.

 

The brokerage now argues the backdrop has materially improved. Credit costs, which spiked as a larger share of the FY20-23 customer cohort turned delinquent, are stabilising as the company completes its balance sheet repair. The consumer finance downturn and borrower overleveraging during that period had led to a sustained asset quality drag. 

 

In response, SBI Cards undertook a strategic reset after FY23, tightening sourcing, underwriting and collections, while curbing new-to-credit onboarding and revolver share.  ALSO READ | Refining boost isn't enough; Nuvama turns selective on Oil & Gas for FY26 

The company’s overhaul has relied heavily on digital acquisition in the open-market channel and artificial intelligence (AI)-driven analytics for portfolio monitoring. Given the typical 12-month lag between customer acquisition and asset quality outcomes, Elara expects the stronger-quality FY24-25 portfolio to begin reflecting meaningfully in credit cost metrics from the second half of FY27.

 

This lag has also shaped CIF trends, analysts noted. Since Q2FY25, quarterly CIF additions have slipped below one million, broadly mirroring the period of peak credit costs. The company deliberately slowed customer acquisition from Q4FY23, focusing on resolving legacy stress and absorbing elevated write-offs through FY23-FY25. Elara says this phase is now nearing an end. With portfolio behaviour expected to improve over the next three quarters, analysts believe, CIF growth should regain momentum from H2FY27.

 

For FY26, the brokerage models credit costs at 8.8 per cent, easing further to an average of 7.5 per cent in FY27-28. The firm sees this as the key earnings lever for SBI Cards, enabling ROA to climb toward 4.5 per cent and ROE to 20.6 per cent by FY28. While asset growth is still likely to trail spending growth for now, spending will be supported by GST-driven momentum, stable market share, and deeper co-branded partnerships. Digital-led open-market sourcing should further aid customer acquisition as risk normalises.

 

Thus, Elara Capital analysts build in a 9.5-10 per cent CIF compound annual growth rate (CAGR), 25 per cent spends CAGR and 15 per cent loan CAGR between FY25 and FY28, more than offsetting a high 57 per cent cost-income ratio and modest fee-income traction. 

 

With the credit cycle turning, asset quality repair largely complete and earnings visibility strengthening, the brokerage lifts its valuation multiple to 30x FY27 earnings from 27x earlier, underpinning the higher target price. 

 

According to Elara Capital, downside risks are now limited as SBI Cards exits the stress cycle and moves into a recovery phase.