India’s leading pure-play credit card company rises 50% in 2025. Can it sustain this comeback rally? – Stock Insights News

SBI Cards, India’s only listed credit card player, rose 5% on Friday to reach its 52-week high of Rs 999.45.  The stock rose after the Reserve Bank of India cut the repo rate by 50 basis points. This will lead to a lowering of credit costs for credit card issuers.

Even before that, SBI Cards has been staging a comeback in 2025, with the stock rising by more than 46% in 2025 so far. Things have not been easy for SBI Cards. The stock had fallen by 40% since its all-time high in October 2021 till 2024. 

So what drove the comeback, and can the rally sustain? Let’s see. 

SBI in India’s Credit Card Industry

HDFC Bank is the leading credit card issuer in India. The lender has a market share of 22% as of March 2025, according to data by 1Lattice. SBI Cards is number two, with a market share of around 18.9%. SBI Cards remains India’s largest pure-play credit card issuer as HDFC Bank has not listed its credit card business.

SBI Cards has a spend market share of 15.6% as of February 2025, according to RBI data, the company said in its earnings call. The company had also crossed 2 crore of cards-in-force in December 2024.

What caused its troubles?

SBI Cards had been under pressure due to rising cost of credit and falling margins.

In November 2023, the RBI increased risk weightage after unsecured loans increased sharply. This move increased the cost of borrowing for credit card players. Subsequently, it put pressure on credit card players’ profitability and net interest margins (NIM).

This move had an industry-wide effect as banks’ lending to NBFCs grew at a slower pace. According to RBI data, this lending increased by only 6.7% in 2024 from 15% growth in 2023. This was the slowest pace of growth in 4 years.

The rising repo rates from 2022 to combat high inflation also made the cost of credit high for SBI Cards. This was visible in its margins.

The company’s financing margin fell from 23% in the March 2022 quarter to 9% in the December 2024 quarter.

Rising NPAs

SBI Cards also saw its NPAs rise in this cycle. Gross non-performing assets is a company’s total non-performing loans. Net NPA shows the lender’s actual risk exposure. It subtracts the provisions the lender made for bad loans from the gross NPA.

SBI Cards’ Net NPA rose from 0.78% in March 2022 to 1.18% in December 2024. Gross NPA also rose from 2.22% to 3.24% in the same period.

How SBI Cards Managed Turnaround

The company’s NIM increased to 12% in March 2025 from 9% in December 2024. This was aided by the cost of funds falling to 7.2%.

The management expects the cost of funds to lower gradually in FY25 and FY26, due to RBI’s rate action. They also expect the NIM to be steady.

Its gross NPA improved from 3.24% in December 2024 to 3.08% in March 2025. Its stage 3 balances, which are the loans that have defaulted, have decreased from Rs 1,777 crore in December to Rs 1,718 crore in March.

Its stage 2 balances also decreased by Rs 282 crore from the previous quarter to Rs 2,801 crore. Stage 2 receivables are the loans that are not yet defaulted but have credit risk.

These are the reasons investors are excited about the stock. Though the company’s net profit fell to Rs 534 crore in March 2025 from Rs 662 crore in the previous year. However, the March 2025 number increased from Rs 383 crore in the December quarter.

Future of Credit Card Players

The credit cards in India are expected to see more growth in the coming years. According to PwC, the number of credit cards in India is expected to reach 20 crore by FY28-29. The firm expects a 15% compound annual growth rate. “This growth can be attributed to multiple factors including innovations by ecosystem participants, new business models and opportunities, changing technology and increasing customer awareness.” PwC said in its report.

As of February 2025, there is 10.9 crore credit cards in force.

SBI Cards which is the number 2 player in the credit card industry is expected to benefit from this.

The company has maintained 10 lakh credit card acquisition per quarter as part of its new strategy. It expects to maintain this trend.

Its strategy to expand its corporate portfolio also made a mark. SBI Cards’ corporate spends increased by 60% from the previous quarter to Rs 8,600 crore.

The credit card player also sees potential in tier 2-3 cities with RuPay credit cards and its UPI acceptance. UPI card spends grew four-fold in March 2025 from the previous year, the company noted.

Crisil also expects a 12 to 13% growth in bank credit in FY2026. This is aided by recent regulatory supports, consumption boost by softer interest rates and tax cuts.

What should the investors do?

Kotak Institutional Equities downgraded the stock to “add” in an April 2025 report. It had set a fair value of Rs 950, which the stock has exceeded. It is valued at 30 times the March FY2027 EPS. The brokerage sees payments having better growth opportunities. Kotak says SBI Cards can capture the opportunity with its relatively strong ecosystem.

However, the brokerage finds the valuations less comforting and said the recent run-up caused limited room for disappointment.

Motilal Oswal also, in an April report, kept a neutral rating with a target price of Rs 975. This is valued at 22 times FY27 EPS. This is after factoring in an improvement in credit costs, contained opex growth and margin improvements.

The brokerage sees spending growth to pick up due to recovery in corporate spends and sustained traction in retail spends. It also projects asset quality to improve due to slowing down of good loans turning bad.

The company’s median 10-year P/E is 43.2 and the stock is currently trading at P/E of 49.3.

Conclusion

SBI Cards has great potential with projected growth for credit cards in India. However, brokerages warn that valuations are expensive. It also sees limited growth after the run-up in the stock.

Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.

Disclaimer

Ananthu C U is an equity market journalist who has written about listed companies, equity market regulations, and economic development. He is deeply interested in increasing his knowledge about the equity market, the Indian economy and listed Indian companies. He generally tracks infrastructure, power and financial companies.

Disclosure: The writer and his dependents do not hold the stock discussed in this article.

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