SBI Cards is down as Carlyle throws stocks, but credit card industry rebounds

  • SBI Cards is the second largest credit card issuer in India.
  • As of July 2021, one in five credit cards issued in India were issued by SBI Cards.
  • With the rebound in the company’s credit card business, find out what analysts have to say.

The SBI Cards share price fell more than 4% on Tuesday, September 21 after US-based private equity firm The Carlyle Group offloaded a 3.4% stake in the company, mopping up approximately 3,267 crores in markets.

The drop in the SBI Cards share price today is in line with expectations, as the Carlyle Group price range was 1,021 to 1,072. The shares were trading around 1,025 by 11:00 am on September 21.

SBI Cards share price since AugustESB / Business Insider India / Thrive

The Carlyle Group had a 15.89% stake in SBI Cards when the company was listed on the Indian Stock Exchange in March 2020. Since then it has reduced its stake on several occasions and, with the most recent sale, its stake. fell to 3.14%.

However, for existing investors in the business, good news is on the horizon.

Edelweiss analysts are optimistic about the company and its future prospects. “We view SBI Cards as a conceptual stock delivering high growth and returns from the only publicly traded player of its kind for the foreseeable future. It would thus permanently command a premium granted to a few Indian stocks ”, indicates a report by Edelweiss dated 15 September.

It’s not just Edelweiss analysts who are optimistic about the company. Here are some brokerage recommendations for SBI cards:

Brokerage Recommendation Target price Upside down
Edelweiss To buy 1350 32%
ICICI Direct To buy 1,200 17%
Motilal Oswal To buy 1,200 17%

Credit card business is rebounding

SBI Cards saw a strong comeback in the June quarter, reporting strong profit growth and lower bad debt provisions.

Here is an overview of some of the main measures of financial performance of SBI Cards:

Details June-21 Mar-21 June 20
Net interest income ₹ 924 cr ₹ 828 cr ₹ 1.138 cr
Net profit 3,046 cr 1754 cr ₹ 3933 cr
Net postcode 0.9% 1.2% 0.4%

Source: Company reports

Although its performance has still not returned to the levels of the previous year, SBI Cards recorded a substantial improvement in all three measures compared to the previous quarter.

Motilal Oswal analysts predict it will only get better from now on.

Details FY22 (est.) FY21
Net interest income 4,006 cr ₹ 3,884 cr
Net profit ₹ 1,664 cr 985 cr
Net postcode 1% 1.2%

Source: Motilal Oswal

Given that SBI Cards is the country’s second-largest credit card issuer, this bodes well for both the company and its shareholders.

SBI Cards is down as Carlyle throws stocks, but credit card industry rebounds
Credit card market share in July 2021RBI / Business Insider India / Flourish

“Spending started showing gradual improvement from June 21st. The same is expected to increase further, as economic activity picks up and restrictions ease, ”said a Motilal Oswal report dated July 24.

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SBI Cards, Adani Ports, HCL Tech, and other top stocks to watch for September 21

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