Despite the economic slowdown and the unprecedented situation posed by Covid-19, the outlook for the digital payments industry and long-term growth story of credit cards in India remains strong due to its favourable demographic changes and low credit card penetration rate, analysts say.
As the largest pure credit-card issuer, the business model of SBI Cards is sound as it benefits from its parent’s largest distribution network (especially on a strategy to expand in smaller towns and cities) and focus on co-branding cards, they say.
“Its robust business model and structural growth story keep us positive about SBI Cards’ long-term prospects. Its rising market share trend and strong financial profile over the past few years are reassuring,” said Anand Rathi Share and Stock Brokers said in its latest report. The brokerage has initiated coverage on the stock with a ‘buy’ rating and the target price of Rs 1,021 per share.
Analysts at Prabhudas Lilladher expect SBI Cards to return to normalcy sooner-than-expected with the emergence of green shoots (fall in the unemployment rate to pre-Covid levels, digital transactions uptick), improving corporate spends led by non-discretionary focus (vendor, tax & utility payments & gradual pick-up in domestic travels) and increasing Banca potential (55 per cent SBI sourcing).
In the long term, India’s strong macroeconomic performance, together with its large working population, aspirational youth population, rising affluence, rapid urbanisation, and an increasing shift from cash transactions to the card and digital payments will continue to propel the growth of India’s largely underpenetrated credit card industry, SBI Cards said in 2019-20 annual report.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.