SBI Cards shares: ‘buy’ or ‘sell’? Stock price soars 1.5%; hits fresh 52-week high

The second-largest credit card issuer in India informed the bourses that it had successfully raised Rs 500 crore at 5.75% through NCDs that will mature in 2023.

SBI Cards and Payment Services, the biggest initial public offering (IPO) of this calendar year so far, looks to be gaining momentum each day with the stock now hitting a fresh 52-week high repeatedly. On Tuesday as bulls took control of Dalal Street, SBI Cards and Payment Services share price surged 1.5% to trade at Rs 815 per share. The only listed player from the cards space of the financial services industry entered the stock exchanges in March, when the weak market sentiment pulled it way below its issue price, slashing expectations that many had from the mega Rs 10,000 crore IPO.

The second-largest credit card issuer in India informed the bourses that it had successfully raised Rs 500 crore at 5.75% through NCDs that will mature in 2023. SBI Cards share price has now gained over 15% since its listing at Rs 658 per share. The mega IPO issue was subscribed 26.5 times in March as investors, not concerned of the coronavirus, rushed to subscribe to the SBI-backed credit card issuer. 

In the first quarter of this fiscal year, SBI Cards and Payment Services saw a healthy growth of 52% in net-interest income, from the previous year. Income from non-interest avenues stood at Rs 783 crore in the April-June quarter. Keeping aside provisions, like any other financial institution to gear up to face the headwinds, SBI Cards posted a net profit of Rs 393 crore, up 14% from the Rs 346 crore it earned a year ago. “We expect growth momentum to rise in retail credit activity and daily spends in the coming months post lifting of lockdown,” said analysts at Geojit Financial Services. The brokerage firm has a buy rating on the stock with a target price of Rs 851.

SBI Cards has been steadily gaining market share with card share reaching 18.3% and share of spends rising to 19.6% as of April this year. Accounts in moratorium declined to 1.5 lakh in June vs 12.5 lakh in May. “We see SBI Card geared to return to normalcy sooner than expected with emergence of greenshoots,” said brokerage and research firm Prabhudas Lilladher in a note last month. Net non-performing assets of SBI Cards slipped 38% on-year basis. Prabhudas Lilladher has a BUY call on target price of Rs 974 per share.

SBI Cards’s business could be slowly returning to pre-Covid days as the lockdown eases. New card accounts increased from 28,000 in April to 181,000 in June. With low penetration of credit cards in India, there is still a lot for SBI cards to explore. “Credit card penetration at 3% is low in India compared to 42% in China and 193% in South Korea. We believe demographic dividend, rising disposable income, and increase in e-commerce activities and internet penetration are fuelling digital payments in general and cards in particular,” said global financial advisory firm Maybank in a report earlier this month.