SBI Cards hits 52-week low, stock down 26% from its 52-week high

The stock hit a 52-week low at Rs 858.45, quoting lower for the fourth straight day on the BSE.

Shares of SBI Cards and Payment Services (SBI Cards) hit a 52-week low of Rs 857.15 after declining 1 per cent on the BSE in Thursday’s intra-day trade. However, it recovered marginally to end the session at Rs 861 apiece. Its previous low was Rs 860.05 apiece hit on December 20.

This is the fifth straight day of decline for the stock of the finance company, and it has slipped 4 per cent during the period. It has corrected 26 per cent from its 52-week high of Rs 1,164.65 apiece touched on September 1. In comparison, the S&P BSE Sensex, has risen 3.8 per cent during the period. SBI Cards, promoted by the State Bank of India (SBI), is among only two standalone credit card issuers in India.

The firm has been on a downward trajectory since October 28 after it reported a mixed bag result for the September quarter of financial year 2021-22 (Q2FY22). Since then, the stock has slipped 24 per cent.

Analysts at HDFC Securities expect SBI Cards’ return on assets to witness variance in the medium term. With increasing competitive intensity from incumbents and challengers, the brokerage expects the fee income pool to shrink gradually, while the net interest income is likely to witness a modest gain with increase in EMIs.

Increasing digitisation of processes such as customer onboarding is likely to drive operating expenses (opex) lower, although the spends-based opex is likely to remain elevated (maintaining the superior value proposition for the customer), HDFC Securities said in a report dated January 8.

While SBI Cards is prone to some of the longer-term category disruption risks from UPI, BNPL, and potential regulations on swipe fees, we believe these will not only play out gradually but also offer adequate profitability set-offs, the brokerage firm said.

The brokerage further said the Reserve Bank of India’s (RBI’s) recent discussion paper revisiting various charges across digital payment modes such as credit cards and debit cards is likely to further harmonise charges. While this may pose a risk to credit card issuers, analysts at HDFC Securities believe the capping of the merchant discount rate (MDR) for credit cards is unlikely. The RBI, in most of its earlier commentaries, has kept the MDR on credit cards unregulated since the credit risk is borne by the issuer, analysts said.

Meanwhile, foreign portfolio investors (FPIs) reduced their stake in SBI Cards by nearly 3 percentage points in Q3. Their holding in the company declined from 13.07 per cent in Q2 to 10.28 per cent in Q3, shareholding pattern data shows. However, domestic mutual funds, insurance companies, and individual shareholders hiked their stake in the firm during the quarter, the data showed.