SBI Card shares surge 5% on heavy volumes, hit fresh record high

Shares of SBI Cards and Payment Services (SBI Card) rose 5 per cent to hit a new high of Rs 957.45 on the BSE on Wednesday on the back of heavy volumes. The stock surpassed its previous high of Rs 918.60, scaled on October 15, 2020.

The trading volumes on the counter jumped 1.5 times. A combined 1.95 million equity shares had changed hands on the NSE and BSE, till 10:34 am. Currently, the scrip was trading 4 per cent higher at Rs 948 on the BSE as against a 0.08 per cent decline in the S&P BSE Sensex.

SBI Card shares were trading higher for the 11th straight session. Since December 3, the stock has rallied 20 per cent after in an exchange notification, HDFC Bank said the Reserve Bank of India (RBI) has advised it to temporarily stop all launches of the digital business generating activities planned under its program ‐ Digital 2.0 and other proposed business generating IT applications, and sourcing of new credit card customers.

SBI Card is the leading issuer of credit cards in India. The company offers wide range of value-added payment products and services. It operates in more than 130 cities in India. The brand has a wide customer base of over 10 million.

Analysts at Kotak Securities believe that the positives of strong revenue growth, led by rising and underpenetrated payments play, highly profitable lending book and benefit of a strong parentage that can lower the origination risk are partly offset by expensive valuations. "We like the space as it is one of the few areas where we see strong growth prospects and we like SBI Card given its strong market share," the brokerage firm said in its initiate coverage report dated December 28, 2020.

Analysts believe the credit card growth story has just started unfolding with visibility of multi-year growth. Factors that will drive growth are expansion of card base in the country (India has just around 30 million credit card holders compared to around 300 million people with bureau records) and greater share of payment flows happening through electronic payments including credit cards. SBI Card being a leading players in the market, both in terms of cards outstanding and spends, is likely to be a key beneficiary of this trend, they said. The stock is, however, trading above brokerage firm's target price of Rs 900 per share.