SBI Cards share, which has caused considerable losses to retail investors in a short period of time, is seen clocking 29% gain in next one year. Bank of America Securities has initiated coverage on SBI Cards and Payment Services with a buy rating and a target price of Rs 680. SBI Cards share closed 5.22% or Rs 27.75 higher at Rs 559 today.
The stock had closed at Rs 532 on April 22. However, the stock was down 29% compared to its IPO issue price of Rs 755 yesterday.
"After factoring the near-term impact of Covid-19, we see strong long-term growth supported by SBIC's diversified model," BofA Securities has said in a note.
'Buy' rating is backed by the under-penetration of the credit card industry as SBI Cards is the only listed pure-play credit card company, with the ability to cross-sell to SBI's vast customer base through Project Shikhar.
Despite factoring the near-term impact of the ongoing coronavirus crisis, the brokerage expects strong long-term growth supported by SBI Cards' diversified model.
The stock hit its all-time low of Rs 501 on April 13 after the 30 day lock-in period for anchor investors came to an end. SBI Cards share price which has been trading below its listing price since March 23, plunged 15.73% to Rs 501 intra day on BSE. The large cap stock closed 15% lower at Rs 505.60 on April 13.
Those who have held the stock since its listing are sitting on a loss of 15%. The stock listed at Rs 658 on BSE on March 16 this year. On NSE, the share made its debut at Rs 661, a discount of 12.45% to the issue price.
SBI Cards IPO, which was held from March 2 to March 5, was subscribed 26.54 times on its last day despite weak market conditions. The IPO which initially attracted lot of investor attention could not deliver listing gains due to crash in global and domestic markets.
In a related development, SBI Cards and Payment Services has reported outstanding borrowings worth Rs 17,362.86 crore as on March 31, 2020. The company had the highest credit rating during the previous fiscal year ended March 2020 with AAA/ Stable rating by Crisil and ICRA, it said in a regulatory filing.
By Aseem Thapliyal