Profits down 20%, but India's #2 credit card player is doubling down: What's SBI Cards' big bet?

Indian Express

2 days ago

In 2020, just before the IPO, SBI Cards' stalls were everywhere, from metro stations to office parks and even malls. In investing circles, too, it was all anyone could talk about.
The IPO was over subscribed, but still listed at a 13% discount. Then came the crash to Rs 500, a dramatic rally in 2021, another dip in mid-2022, and yet again, a steady climb. If you look at the full picture, from IPO to now, the stock has returned about 6% CAGR. Respectable, but nowhere close to the euphoria it started with.
But the business has been far more interesting than the stock.
SBI Cards has quietly built a massive customer base of over 2 crore cards, capturing nearly 20% of India's credit card market. Its profits grew 39% quarter-on-quarter, although still down 19% from last year. In many ways, it has been a rollercoaster both in the markets and in the business.
So, where does SBI Cards go from here? And what should investors make of it today?
Where SBI Cards stands today: Business and numbers at a glance
At its core, SBI Cards is a credit card company. It is not a bank. It does not take deposits. It earns money through interest on outstanding card balances and various fees when customers spend, withdraw, or convert purchases into EMIs. That focus makes it different from traditional lenders and also gives it more room to grow as India's digital economy expands.
As of March 2025, SBI Cards had over 2.08 crore cards in force, giving it close to a 19% share of the Indian credit card market. That makes it the second-largest issuer in the country, after HDFC Bank, and by far the largest non-bank player in this space.
The card base has grown steadily, up 10% over the past year. In the last quarter alone, it added over 11 lakh new accounts, keeping its run rate stable. What is notable is that 63% of its sourcing came through SBI's bank channels, showing the strength of its parent tie-up. The rest came from open-market channels, like digital platforms and foot-on-the-street sales.
When it comes to card usage, the numbers are equally strong.
In FY25, total customer spends grew 11% year-on-year to Rs 3.3 lakh crore. Within this, retail spends alone touched Rs 3.03 lakh crore, while corporate card usage also bounced back, especially in Q4.
For context, SBI Cards' spend market share stands at 15.6%, showing that customers are not just holding the cards but actively using them.
On the lending side, card receivables (loans outstanding on cards) grew by 10% to Rs 55,840 crore.
More importantly, about 59% of this book is interest-bearing, meaning these customers either revolve balances or convert purchases into EMIs, which are the primary sources of revenue for the company. Around 35% of the portfolio is in EMIs, while the rest are transactors who pay in full and on time.
In terms of revenue, SBI Cards clocked Rs 18,637 crore in total income in FY25, up ~7% from the previous year. Interest income grew strongly, supported by rising yields and stable spreads. However, fee income was flat, and that pulled down overall revenue growth.
And then the big pressure point is around profitability.
Net profit fell by 20% to Rs 1,916 crore, even as profits jumped 39% sequentially in Q4. The yearly decline was due to high credit costs, essentially more provisioning for customers who missed payments, and a bit of pressure on fee-based income.
So, the top line is growing. Usage is solid. The card base is expanding. But the bottom line took a hit, and that is what sets the tone for the next part on why credit costs are rising and what SBI Cards is doing about it.
The credit cost spike: What went wrong and what SBI Cards is doing about it
Credit cards are unsecured loans, which means when customers default, there is no asset to recover. That makes credit cost management the most critical part of the business.
In FY25, this is where SBI Cards faced its biggest challenge.
The company's gross credit cost jumped to 9.0%, up from 7.1% in FY24. That means for every Rs 100 in loans, it had to set aside Rs 9 to cover potential losses. These are levels last seen during pandemic disruptions.
In the March 2025 quarter alone, SBI Cards wrote off nearly Rs 1,300 crore worth of loans, with gross NPAs reaching 3.08%, a slight improvement from the previous quarter, but still elevated.
This pressure is not unique to SBI Cards. Most credit card issuers in India have seen rising delinquencies in the unsecured lending space. The slowdown in job creation, rising EMI burdens, and post-Covid credit fatigue are all playing a part. But in SBI Cards' case, the surge in write-offs was sharper, especially among certain borrower segments sourced aggressively in earlier quarters.
To its credit, management acted early. Over the last 5-6 quarters, SBI Cards has taken several steps:
● Tightening of underwriting: New customer sourcing now leans more towards higher credit score segments. The share of 'prime and above-prime' borrowers has risen significantly in new acquisitions.
● Stronger portfolio monitoring: Delinquency trends are being tracked more granularly, especially for customers showing early signs of stress.
● Improved collections strategy: The company expanded both physical and digital collection efforts to engage with at-risk borrowers earlier and offer structured repayment options.
● Model refresh: The Expected Credit Loss (ECL) framework was updated this year, and provision buffers were realigned based on actual customer behaviour rather than only historical models.
All this has started showing some effect. Stage 2 and Stage 3 balances, basically the risky parts of the loan book, declined sequentially in Q4. Credit costs also came down slightly from 9.4% in Q3 to 9.0% in Q4, suggesting that the worst might be behind.
The management believes credit costs have peaked and should gradually moderate over the next few quarters. As the CEO implies, 'The unsecured lending ecosystem still has unknowns.' Which is why SBI Cards has chosen to grow slowly and clean up the base before pushing hard again.
The short-term pain here is real. But so is the effort to fix it.
How SBI Cards is building for the future: Digital, UPI, and more
Even as it dealt with rising credit costs, SBI Cards did not slow down on building for the next phase of growth. In fact, some of its biggest strategic moves in FY25 happened quietly in the background, especially in digital and payments innovation.
1. Digital onboarding at scale
One of the most impactful shifts has been how SBI Cards acquires new customers. The company rolled out a fully digital onboarding platform called SBI Card Sprint. This was integrated across bank branches and direct-to-customer channels. As a result, a majority of bank-sourced cards were onboarded digitally in FY25.
This shift matters because digital onboarding means:
● Faster application processing (using AI-based validation)
● Fewer errors or document gaps
● Lower acquisition costs
● Better tracking of customer quality from day one
It also reflects a larger trend: SBI Cards is now targeting the digital-first, mobile-savvy Indian customer, especially in Tier 2 and Tier 3 cities. This is where the next wave of credit card users will come from.
2. Tapping the UPI boom
A game-changing move in FY25 was the integration of RuPay credit cards with UPI. This allowed users to tap and pay at QR-code terminals using their credit card, something not possible until recently.
The results were instant. SBI Cards saw UPI-based credit card spends grow over 4X year-on-year.
What makes this even more exciting is that the top UPI spend categories, such as groceries, utilities, fuel, apparel, and restaurants, are daily essentials. This means credit card usage is becoming part of everyday Indian spending, even in places without card machines.
This is a big unlock for SBI Cards, especially in smaller towns where QR codes are everywhere but POS terminals are not. Unlike debit UPI, credit UPI earns fees and interest for the issuer, making it a profitable shift.
3. Product innovation and premium push
On the product side, SBI Cards continues to expand its portfolio thoughtfully. In FY25, it launched:
● SBI Card Miles, a travel-oriented card targeting premium consumers
● KrisFlyer SBI Card, in partnership with Singapore Airlines
● Expanded its fuel card footprint – BPCL SBI Card crossed 4 million users
These moves show a clear direction: focus on high-spend, high-value customers, where fee and interest income is stronger. Alongside, the company also ran hundreds of targeted offers and deals across categories, enabled by a new hyper-personalisation platform that recommends offers based on user behaviour.
The company is also making a quiet entry into the corporate and commercial card space, a segment that is less risky, more predictable, and has cross-sell potential. Corporate spends in Q4 grew by over 60% quarter-on-quarter.
In short, it appears that SBI Cards has utilised FY25 to modernise its core. The real question now is whether it can build on this foundation to accelerate again.
What should investors expect next? Outlook and valuation
From its IPO in March 2020 to now, SBI Cards' stock has delivered just ~6% CAGR, a modest return considering the initial excitement. But those headline numbers mask a business that has gone through multiple economic cycles, regulatory shifts, and internal restructuring in just five years.
The company has now reached a point where its core growth levers are reset and ready:
● Card additions are healthy, with a robust pipeline through SBI's bank channels.
● Spends are growing steadily, with digital and UPI adding tailwinds.
● High-risk accounts are being cleaned up, and credit costs appear to have peaked.
● New revenue streams like corporate cards and EMI products are scaling up.
The question then becomes how the business should be valued from here?
As of FY25, SBI Cards reported:
● EPS of Rs 20.2, down from Rs 25.2 in FY24 due to elevated credit costs.
● Return on Assets (RoA) of 3.1% and Return on Equity (RoE) of 14.6%, a decline, but still relatively healthy compared to some of the other NBFCs.
● The company maintains a capital adequacy ratio of 22.9%, which provides ample buffer for growth.
At its current market price, SBI Cards trades at roughly:
● 50x FY25 earnings
● 7x book value
These are rich multiples, especially when compared to private banks or diversified NBFCs. But they also reflect the company's unique positioning:
● Pure-play credit card business with no exposure to secured lending
● Access to a vast base of SBI customers, a competitive advantage no other issuer has
● Structural tailwinds from India's shift to digital payments, EMI financing, and UPI-linked credit usage
That said, the path to re-rating from here is conditional.
For SBI Cards to trade back at 30x+ earnings and deliver 20-25% upside from current levels, a few things need to happen:
● Credit costs must normalise to 6-7% levels
● Fee income must rebound, helped by higher activity and new partnerships
● Margin profile should stabilise, with controlled cost-to-income ratios
● The market must get comfortable with moderate but profitable growth, rather than breakneck expansion
On the flip side, downside risks include:
● Prolonged stress in unsecured lending
● Regulatory changes that cap interest or fee income
● Rising competition in digital-first credit cards, especially from fintechs and NBFCs
Final take
SBI Cards is no longer in its hyper-growth phase, but it is not in decline either. It is entering a more mature, more strategic phase of growth, one that prioritises quality over scale.
For long-term investors looking at India's consumption story, SBI Cards offers a direct play on credit, digitisation, and rising middle-class aspirations. But it requires patience and a close watch on how the company manages risk in a market that is evolving faster than ever.
Note: This article relies on data from annual and industry reports. We have used our assumptions for forecasting.
Parth Parikh has over a decade of experience in finance and research and currently heads the growth and content vertical at Finsire. He holds an FRM Charter and an MBA in Finance from Narsee Monjee Institute of Management Studies.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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