Update on the Indian Equity Market:
On Thursday, NIFTY closed 0.5% lower at 17,618. Top gainers in NIFTY50 were Bajaj Finance (+2.1%), Bajaj Finserv (+2.1%), and Tata Motors (+1.0%). The top losers were Power Grid (-2.8%), Asian Paints (-2.3%), and Shree Cement (-2.2%). The top gaining sectors were Realty (+1.5%), Consumer Durables (+1.0%), and PSU Banks (+0.8%), while the top sectoral losers were Media (-0.9%), Metal (-0.9%), and Bank (-0.8%).
Experts of an interview with Mr. Rama Mohan Rao Amara, MD & CEO at SBI Cards aired on CNBC TV18 on 29th September 2021:
- The industry has recorded strong spending at the aggregate level. SBI Cards crossed pre- pandemic levels in terms of run rate.
- The company adopted sustainable strategy and leveraged on every opportunity that they have that is reflected in improvement in market share. Both channels- direct sources and the parent company SBI are contributing equally to improvement in market share.
- The results of strategy they implemented are reflecting in their improvement in market share, the market share was improving steadily and they have aim for very sustainable performance. This has also helped in diversification of risk and profitability of portfolio.
- Gradual unlocking has a positive impact on spends per card. In 1QFY22, online spends were contributing to the card spend. With the unlocking, point of sale (POS) contribution is increasing, discretionary spends improved due to categories like jewelry, apparel, and restaurant spends are increasing. Non-discretionary categories such as insurance, health and wellness are also contributing in a big way.
- SBI Cards aimed for 10,000 new accounts per day and they reached that level and they maintaining it consistently. They have to manage attrition for net growth of the company.
- SBI Cards has open market and banca customer channel in open market they have many collaborations.
- He expects growth of around 4 million card additions in a year & India is still an underpenetrated market when it comes to credit cards.
- They are planning to expand their market into tier-III and tier-IV cities with the help of their bank channels which beneficiary for SBI Cards in customer addition.
- The market expansion in tier-III and tier-IV cities takes slightly longer time compared to tier-I and tier-II.
- If they are growing at 2 million, then it is safe to presume that it will be five times minimum for the industry, he mentioned.
Asset Multiplier comments:
- The company is expected growth in tier-III and tier-IV cities, which might be lucrative for the industry.
- SBI Cards might be have an advantage than other peers are their branch channels in tier-III and tier-IV cities which beneficiary for SBI Cards in customer addition.
- The risk from growth of the Fintech organizations might be contraction in the market share of SBI cards.
Consensus Estimate: (Source: market screener websites)
- The closing price of SBI Cards was ₹ 1,027/- as of 30-September-2021. It traded at 12x/ 10x/ 7x the consensus book value estimate of ₹ 84/108/139 for FY22E/23E/24E respectively.
- The consensus price target is ₹ 1,185/- which trades at 9x the book value estimate for FY24E of ₹ 139/-
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