SBI Card has surged 40% as lockdown blues blow over ⁠— but those who got shares in the IPO are still in the red

SBI Card has surged 40% as lockdown blues blow over ⁠— but those who got shares in the IPO are still in the red
SBI Card share priceBSE / Business Insider India / Flourish
  • After hitting a 52-week low of ₹495 in May, the SBI Card share price has surged by 40%, inching closer to its issue price of ₹755.
  • In the six trading sessions in July, the SBI Card stock jumped by 10%, crossing the ₹700 mark for the first time after March.
  • Analysts are bullish on the stock, expecting it to cross ₹900 in the next one year.
SBI Card was touted as a blockbuster initial public offering (IPO), but those who got shares allotted in the IPO are still in the red. Whereas those who bought it in the month of May would have seen their investment balloon by 40%.

It may not be too late, though, since analysts are still looking at a target price of ₹900 in the next one year.
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Brokerage firmTarget priceUpside
Axis Capital₹7508%
Macquarie₹90029%

Note: Upside as compared to the closing price of ₹697 as on July 8, 2020.
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Why are analysts upbeat about SBI Card?

The reason why SBI Cards lost sheen right after the IPO was the fear that the COVID-19 lockdown will lead to too many defaults. However, as per data available now, the damage has been limited.
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PeriodRepayments by customers availing moratorium
March25%
April24%

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Source: Axis Capital

On the corporate side, only 2 companies have availed moratorium.

According to the Axis Capital report, there are multiple tailwinds for SBI Card’s growth, with the primary one being the fact that the Indian credit card market is underpenetrated. According to a Bank of America Securities report, India has the lowest credit card penetration in the world at just 3%.

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SBI Card has surged 40% as lockdown blues blow over ⁠— but those who got shares in the IPO are still in the red
Credit card penetration in India and its peersBank of America Securities / Business Insider India / Flourish

This presents credit card companies with immense potential, both in terms of market share as well as revenue, as credit card spends in India are expected to cross ₹15 lakh crore ($200 billion) in the next five years.

“We raise FY21/22 earnings per share [forecast] by 16%/9% respectively. Thus, we raise our target price by 18% to ₹900,” brokerage firm Macquarie said in a report.

SEE ALSO:

SBI Card profit gets squeezed by bad loans, impairment charge, and a big provision for COVID-19

Here's why SBI Cards share price may jump 30% in the next one year, according to Bank of America-Merrill Lynch

SBI Cards lists on the worst possible day and its stock slips 13% on debut
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