SBI Cards hits new high since listing; stock rallies 73% from March-low

Shares of SBI Cards and Payment Services moved higher by 4 per cent to Rs 855.55 on the BSE in the intra-day trade on Friday, gaining 6 per cent in the past two trading days. The stock of State Bank of India (SBI)-promoted company traded at the highest level since its listing on March 16, 2020. It surpassed its previous high of Rs 855, hit on September 3, 2020. With the past two days' gain, the share price of SBI Cards has rallied 73 per cent from its low of Rs 495.25, touched on May 22, in the intra-day trade.

The stock finally settled 3.6 per cent higher at Rs 849.45, also its highest level on the closing basis since its listing. Earlier, on August 28, it closed at Rs 838.20 on the BSE. A combined 2.86 million equity shares changed hands on the counter on the NSE and BSE today.

SBI Cards is the second-largest credit card issuer in India.

Despite the economic slowdown and the unprecedented situation posed by Covid-19, the outlook for the digital payments industry and long-term growth story of credit cards in India remains strong due to its favourable demographic changes and low credit card penetration rate, analysts say. 

As the largest pure credit-card issuer, the business model of SBI Cards is sound as it benefits from its parent’s largest distribution network (especially on a strategy to expand in smaller towns and cities) and focus on co-branding cards, they say.

“Its robust business model and structural growth story keep us positive about SBI Cards’ long-term prospects. Its rising market share trend and strong financial profile over the past few years are reassuring,” said Anand Rathi Share and Stock Brokers said in its latest report. The brokerage has initiated coverage on the stock with a ‘buy’ rating and the target price of Rs 1,021 per share.

Analysts at Prabhudas Lilladher expect SBI Cards to return to normalcy sooner-than-expected with the emergence of green shoots (fall in the unemployment rate to pre-Covid levels, digital transactions uptick), improving corporate spends led by non-discretionary focus (vendor, tax & utility payments & gradual pick-up in domestic travels) and increasing Banca potential (55 per cent SBI sourcing).

In the long term, India’s strong macroeconomic performance, together with its large working population, aspirational youth population, rising affluence, rapid urbanisation, and an increasing shift from cash transactions to the card and digital payments will continue to propel the growth of India’s largely underpenetrated credit card industry, SBI Cards said in 2019-20 annual report.