SBI Cards will see rebound once the market settles: Hardayal Prasad, MD & CEO, SBI Cards

Update on the Indian Equity Market:

On Tuesday, NIFTY50 closed 2.5% lower at 8,967. All sectoral indices closed in the red except FMCG (+0.9%) and Pharma (+0.3%). Media (-5.9%), Financial Services (-4.6%) and Bank (-4.1%) were the top losing sectors. The Nifty 50 top gaining stocks for the day were Yes Bank (+59.3%), Hindustan Unilever (+3.1%) and Eicher Motors (+2.8%) while the losers were Zee Entertainment (-20.0%), IndusInd Bank (-9.2%) and ICICI Bank (-8.9%).

Excerpts from an interview with Mr Hardayal Prasad, MD & CEO, SBI Cards Ltd. (SBICARD) with CNBC -TV18 dated 16^th March 2020:

• About the share price bounce back: Mr. Hardayal said that in terms of return on equity (ROE), revenue and growth, when these minor blips of the market are overcome going forward, the company’s strength will come to the fore and they should see a strong rebound.
• One of the biggest things is that the penetration of the credit card in India is very low, this gives SBI Cards a huge opportunity to grow.
• According to him, the aspirations of tier II and III cities have still not been met. People want to spend, they have money. They want good things in life and they did not have the opportunities till a few years back. Now with the PoS infrastructure, with the e-commerce and so many other things happening, there is a big potential sitting over there. Thus, SBICARD feels the growth story in India will continue and the Company will continue to show robust growth.
• He thinks other countries have seen massive penetration of credit cards into smaller towns. Thus, in India, if we leverage ourselves properly if we continue to have our policies right and have a good model, the Indian credit cards market will continue to see similar growth stories.
• About the NPA concerns with credit card businesses, he said: In the last 10 years, since the last cycle has seen high NPAs and delinquencies, there has been a major shift in the way the business:

1. India now has an absolutely robust and strong credit bureau which is very important for any country to manage delinquencies.
2. IT infrastructure, which has been created all across.
3. The overall modeling that is been done.
4. The business is spread out. Earlier it was only in the metros; now it is spread out to Tier II and III cities. As many as 58% of the business is now coming from Tier-II cities. Now the leveraging that is there in tier II & III cities is pretty low.

• So, he doesn’t think the kind of phenomenon one saw in post-Lehman times is there anymore. One can calibrate risks, control NPAs and can ensure good profitability.