Overview of SBI Card
(a) They are the second-largest credit card issuer in India, with an 18.0% market share of the Indian credit card market in terms of the number of credit cards outstanding as of September 30, 2019. SBI Card is a subsidiary of State Bank of India.
(b) They offer an extensive credit card portfolio to individual cardholders and corporate clients which includes lifestyle, rewards, travel and fuel, shopping, banking partnership cards and corporate cards covering all major cardholder segments in terms of income profiles and lifestyles.
(c) SBI Card has a broad credit card portfolio that includes SBI Card-branded credit cards as well as co-branded credit cards that bear both the SBI Card brand and our co-brand partners’ brands.
It offers four primary SBI Cardbranded credit cards: SimplySave, SimplyClick, Prime and Elite, each catering to a varying set of cardholder needs.
It is also the largest co-brand credit card issuer in India according to the CRISIL Report, and have partnerships with several major players in the travel, fuel, fashion, healthcare and mobility industries, including Air India, Apollo Hospitals, BPCL, Etihad Guest, Fbb, IRCTC, OLA Money and Yatra, among others.
(d) It has a sales force of 33,086 outsourced sales personnel as of September 30, 2019, operating out of 133 Indian cities. Had a presence in 3,009 open market points of sale across India as of September 30, 2019.
In addition, its partnership with SBI provides access to SBI’s extensive network of 22,007 branches across India, which enables it to market credit cards to SBI’s vast customer base of 43.6 Crores customers as of March 31, 2019.
Revenue Model
They generate two types of income:
(a). non-interest income (primarily comprised of fee-based income such as interchange fees, late fees, and annual fees, among others)
(b) Interest income on credit card loan.
(c) MDR( Merchant Discount Rate)- The fees credit card company charges from the merchant for providing a facility to pay when a customer buys product from the shop. When we go to the market and purchase a product, then we have two options to pay for it, one, Cash and another Card payment ( debit or credit ). When you pay via Credit Card, company charges an MDR fee from the shopkeeper.
Financial Performance
(a) The total income increased from ₹3471 Crores in fiscal 2017 to ₹7286 Crores in fiscal 2019 at a CAGR of 44.9% and revenues from operations have increased from ₹3346 Crores in fiscal 2017 to ₹6999 Crores in fiscal 2019 at a CAGR of 44.6%.
(b) The net profit increased from ₹372 Crores in fiscal 2017 to ₹862 Crores in fiscal 2019 at a CAGR of 52.1%.
(c) The ROAE has remained stable at 28.5% in fiscal 2017 and 28.4% in fiscal 2019, while ROAA increased from 4.0% in fiscal 2017 to 4.8% in fiscal 2019.
InvestorZone Take:
Opportunity:
The business of credit cards in India is at a very nascent stage. As per DRHP, our country has an urban population of approximately 45 Crores. We may assume that a credit card is used mostly by the urban population. In India, as on date, we have approximately 5 Crores credit cards, so in terms of urban population, this is very thin.
In the e-commerce industry, only 30-35% payment is made through Credit card and the majority of the payment is done through cash on delivery model. Nowadays, these e-commerce companies are giving an option to the user to pay via debit or credit card instead of cash by providing a POS machine while delivering a product. This will also give impetus to credit card companies. Moreover, the e-commerce industry itself at the nascent stage, so the growth of the e-commerce industry will have a direct impact on the credit card business.
Millennials( age below 30 ) are using a credit card more often than our old age counterparts. India has one of the youngest populations in the world. The median age of India’s population is 28.4, which is the youngest as compared to the USA( 38.4), China(38.4), Russia(39.6) and Japan(48.4). This factor is also a driving force for credit card companies.
As we are moving towards a cashless economy, the growth of a Credit Card is inevitable.
Risk:
The only risk credit card companies have is the impact on business due to the slowdown in the economy. In the slowing economy, the loss of jobs happened quite fast. Loss of job have the first casualty on Credit card payment. As these companies don’t have any other business, the risk will be more in a prolonged slowdown.
2 Comments
Good one! Thanks for sharing. By the way What's the benifit of investing in funds over the individual stocks and bonds?
ReplyDeleteNSE IPO
RBL Bank Ltd
UTI AMC
CSB Bank
Reserve Bank of India
There are several reasons why investing in mutual funds is a healthy investment option:
DeleteProfessional management
When you invest in mutual funds, you may quit worrying about where and how to invest. Let your fund managers take a call based on thorough market research, monitoring and experience.
Diversification
Mutual funds can also invest in other assets like bonds, cash, or commodities like gold and other precious metals. This is called diversification and it allows you to reduce the risk of investing in one particular stock or sector. Additionally, it gives you a broader exposure to various stocks and sectors.
Liquidity
Mutual funds are more or less classified as liquid investments; unless guided by a pre-specified lock-in period. This means, as an investor you can redeem your unit holdings at any point (subject to exit load, if any) -- giving you any time access to your money. Further, funds are well integrated with the banking system -- which means that most funds can transfer money directly to your bank account.