Target: ₹1,000
CMP: ₹836.75
Notwithstanding Covid-induced disruptions and rising competitive intensity from alternate payment/credit products, India’s credit card-base doubled to 7.4 crore in Mar-22 from 3.7 crore in Mar-18, and now stands at a high 7.9 crore (active base).
Cumulative-spends (7MFY23) growth is at 58 per cent y-o-y (albeit on a low base), indicating strong underlying growth currents. We expect overall industry CIF CAGR of 17 per cent and spends to post a near pre-Covid CAGR of 32 per cent in FY22-25 (33 per cent CAGR in FY15-19).
SBI Cardsand Payment Services is India’s 2nd-largest credit-card issuer, with 19.1 per cent market share of active cards-in-force (CIF) as of Oct-22, and ranks 3rd in terms of spends, with 18 per cent market share.
We expect SBI Cards to log a strong CIF CAGR too, at 18%, and spends CAGR of 30 per cent in FY22-25, thus largely upholding its market share. Beyond FY25, we expect SBI Cards to maintain spends-share at about 18 per cent, and clock FY25-35 CC-spends CAGR in the mid-to-high teens.
Key downside risks are continuous erosion in SBIC’s spends market-share; regulatory cut in MDR/ICF. Our worst-case scenario (Regulator cutting ICF to 100bps from FY26 and gradual reduction thereafter) yields a Mar-24 FV of ₹690 (implying 16 per cent downside), though we see such a large-cut as unlikely.