Rally in SBI Card May Have Priced in Improved Outlook

Mumbai, June 11, 2025 — Shares of SBI Cards and Payment Services Ltd (SBI Card) have seen a strong rally in recent weeks, buoyed by improving fundamentals, upbeat management commentary, and a broader optimism in the Indian credit market. However, market analysts are beginning to caution that the recent run-up may have already priced in much of the near-term positives.

The stock has surged over 18% in the past two months, significantly outperforming benchmark indices. It currently trades near ₹870, not far from its 52-week high, with bullish sentiment driven by expectations of rising credit card spends, improved asset quality, and strong customer acquisition.

Improving Business Metrics Drive Optimism

SBI Card’s Q4 FY25 earnings painted a favorable picture. The company reported a 13% year-on-year rise in net profit to ₹664 crore, supported by a 25% increase in revenue from operations at ₹4,665 crore. Notably, the company saw a 21% growth in card-in-force, and spends per card also ticked higher due to robust consumer sentiment and a rise in discretionary purchases.

“We have seen a steady recovery in travel, hospitality, and retail segments, which has led to a healthy jump in card spends. Additionally, we are witnessing improved repayment behavior and benign delinquencies,” said Rama Mohan Rao Amara, MD & CEO of SBI Card, during the post-earnings investor call.

Gross NPA declined to 2.1% from 2.4% in the previous quarter, and the company continues to maintain healthy provisioning coverage. Net interest margin (NIM) remained strong at 11.2%, reaffirming the company’s profitability strength.

Valuation Premium and Caution Ahead

Despite these positives, analysts warn that valuations are beginning to look stretched. SBI Card is currently trading at over 8 times FY26 estimated book value and 32 times forward earnings — levels that suggest much of the near-term optimism could already be baked in.

“The recent rally reflects improving fundamentals, but upside from current levels may be limited unless there is a fresh catalyst,” said Ruchit Mehta, Fund Manager at SBI Mutual Fund. “Any disappointment in quarterly numbers or rise in delinquencies due to unsecured lending risks could trigger a correction.”

Brokerages like Jefferies and Kotak Institutional Equities have maintained a ‘Hold’ rating on the stock. Jefferies recently raised its price target to ₹890, citing improved spend outlook but highlighted concerns over intense competition from fintech players and legacy banks ramping up their credit card offerings.

Broader Credit Card Industry Tailwinds

The surge in digital adoption, increasing formalization of the economy, and rising middle-class consumption are structural tailwinds for the credit card industry. India’s credit card penetration still remains low, with less than 4 cards per 100 people, compared to over 30 in developed economies — leaving immense room for growth.

RBI data showed credit card spends in India reached a record ₹2.11 lakh crore in May 2025, up 15% YoY. SBI Card, with over 18% market share in terms of card-in-force, stands to benefit from this macro trend. The company has also focused on launching co-branded cards and leveraging its parent SBI’s wide customer base to drive adoption.

“Credit card adoption is seeing a secular uptrend in India. As long as SBI Card maintains its credit underwriting discipline, it remains well-placed,” said Ritika Shah, Senior Analyst at Emkay Global.

Investor Outlook: Time to Book Profits or Hold Tight?

Given the steep rally and rich valuations, retail investors may be wondering whether to stay invested or lock in gains. Experts suggest a balanced view.

“If you are a long-term investor, SBI Card still holds promise due to its scale, robust parentage, and secular consumption theme. But fresh entry at current levels should be done cautiously and preferably on dips,” said Vivek Mohan, Head of Research at Religare Broking.

Moreover, any interest rate softening later in the year could support valuation multiples in the consumer finance space. However, investors should watch out for regulatory moves, particularly around unsecured lending norms, which could impact the growth trajectory.

SBI Card has rewarded investors with a sharp rally on the back of improving business momentum and macro trends. While the medium to long-term story remains intact, near-term risks of valuation overheating and increased competitive intensity must be factored in. Investors may do well to reassess positions based on individual risk profiles and investment horizons.