Credit card spending touched an all-time high of ₹ 1.29 trillion in October, aided by festival season purchases. According to the latest data released by the Reserve Bank of India (RBI), this is 5.5 per cent higher than the previous month’s figure of ₹ 1.22 trillion.
The RBI had mandated card issuers to deactivate credit cards that were inactive for a year, leading to a net reduction in credit cards. On average, the industry was witnessing a net addition of over 1.5 million credit cards a month as players became aggressive in the unsecured lending business after the pandemic, before the RBI norms kicked in.
The net addition was led by SBI Cards and Payment Services, which added 339,160 cards in October. It was followed by Axis Bank with 261,367 cards, ICICI Bank with 221,280 cards and HDFC Bank with 217,979 cards.
SBI Cards and Payment Services Limited is a non-deposit-accepting, non-banking financial company registered with the RBI. It issues credit cards to consumers in India and is a subsidiary of India’s largest commercial bank, the State Bank of India.
It is a large-cap company with a market capitalization of 78841 crores and its shares were trading at ₹ 819.60 at 11:32 AM on Wednesday. It has a good return on equity of 23.00 per cent. However, it has a debt-to-equity ratio of 3.16. Its shares were trading at a price-to-equity ratio (P/E) of 36.48, which is higher than the industry P/E of 25.24, indicating that the stock might be overvalued.
Motilal Oswal Financial Services has a buy call on the shares of SBI Cards and Payment Services with a target price of ₹ 1100. This translates to an upside of 34.21 per cent as compared to its share price.
HDFC Securities has a buy call on the shares of SBI Cards and Payment Services with a reduced target price of ₹ 1196. Earlier it had given a target price of 1229.00. The latest target implies an upside of 45.92 per cent as compared to its share price. In its research report dated October 31, the brokerage said that the company’s efforts at portfolio releverage with a higher share of self-employed customers in incremental card sourcing are yet to fructify.
Written by Simran Bafna
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