SBI Card tops IPO price after Q1 numbers beat Street estimates

Mumbai: Shares of SBI Cards and Payment Services, India’s second-largest credit card issuer, on Tuesday crossed their IPO price for the first time as its stronger-than-expected June quarter results lifted investor sentiment.
The stock ended up 3.3 per cent at Rs 776.8 after hitting an all-time high of Rs 798 during the session, crossing its initial public offering price of 775 per share.

The company on Monday posted a 13.8 per cent year-on-year rise in net profit at 393.3 crore for the quarter ended June, while total revenue from operations rose 4 per cent to Rs 2,152.2 crore. HSBC raised its price target on SBI Cards to Rs 825 from Rs 720, while maintaining a ‘buy’ rating, after the first quarter earnings.


“High share of salaried customers (85 per cent), the role of credit data bureaus/credit scores for retail customers, and an extensive collection infrastructure are key positives in the current environment. Moreover, the shift towards online spends and cash-to-digital economy bode well for the long-term outlook,” the brokerage said.

SBI Cards’ IPO was one of the most-awaited public offering in recent times with the issue getting subscribed 26 times. However, the unexpected slump in the market due to the coronavirus outbreak and rich IPO valuations resulted in the stock making a tepid debut on March 16 and weaken thereafter. The stock hit its lowest level of Rs 495.25 on May 22. The revival in sentiment has helped SBI Cards shares rebound more than 50 per cent from their lows.

HSBC said compared to the first round of the automatic moratorium in March-May, loans under the second round of the moratorium fell to 6 per cent of loans against 32 per cent at the end of May.

Earlier this month, Macquarie said SBI Cards can still deliver a 24 per cent return on equity in FY21 even after incorporating around 25 per cent of revolver loans slipping into non-performing loans. A high book value compounding of 25 per cent-plus justifies premium valuations, said Macquarie, retaining ‘outperform’ rating with a target price of Rs 900 and rating the company as its top pick among non-bank financial companies.