SBI Cards and Payment Services Ltd

SBI Cards & Payment Services is the 2nd Largest Purely Credit Card Issuer in India with 1.18 crore cards in force enjoying a healthy market share of 19.1% as of March 31, 2021.

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• Journey Since Inception
• Executive Board Members of SBI Cards and Payment Services
• Shareholding Pattern of SBI Cards and Payment Services
• Products Categorization of The Company
• Market Share in Card in forced to Customers
• Loan Book of SBI Cards and Payment Services Ltd
• Borrowing Mix
• Interest Parameters
• Operational Parameters
• Financial Parameters
• Management Discussion and Concall Highlights
• Opportunities
• Risk concern

(A) About SBI Cards and Payment Services Ltd.

SBI Card, a subsidiary of the State Bank of India, is the second-largest credit card issuer in the country. 

It offers financial access with its wide range of value-added payment products and services that fulfil transactional and short-term credit requirements.

It offers 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.

The Company operates in a single business and geographical segment. Currently, SBI Cards caters its products and services in the Indian Region only.

(B) Journey Since Inception SBI Cards and Payment Services

SBI Card was launched in October 1998 by the State Bank of India and GE Capital. Incorporated as SBI Cards and Payment Services Private Limited (SBICPSL), it is headquartered in Gurgaon, Haryana.

Further, in December 2017, State Bank of India and The Carlyle Group acquired GE Capital's stake in SBI Cards and Services. In March 2020, SBI Cards and Services became the first pure play credit card company to list on the stock exchanges in India.

Within a short span of 10 months from inception, the company achieved a credit card customer base of 1 lakh. SBI Cards and Services Ltd entered the '1Million Card Club’ in 2002 and crossed the 2 million card base in 2005.

(C) Executive Board Members of SBI Cards and Payment Services

(I) Mr. Dinesh Kumar Khara (Chairman)

Mr Dinesh Kumar Khara is the Chairman of the State Bank of India (SBI).

Mr Khara joined SBI as a probationary officer in 1984 and has over 36 years of experience in the banking industry.

Before assuming office as Chairman- SBI, Mr Khara has held several key positions in SBI such as MD (Global Banking & Subsidiaries), MD (Associates & Subsidiaries) and many more.

Moreover, Mr Khara led the International Banking Group, Large Corporate and Treasury operations as the Managing Director.

He holds a Bachelor’s degree in commerce, is a postgraduate in Commerce from Delhi School of Economics and holds an MBA degree from the Faculty of Management Studies, New Delhi. Further, he is also a Certified Associate of the Indian Institute of Bankers (CAIIB).

(II) Mr. Rama Mohan Rao Amara (Managing Director & CEO)

Mr Rama Mohan Rao Amara is the present MD and CEO of SBI Cards & Payment Services.

Mr Rao manages all aspects of SBI Card's business. In his previous role as the Chief General Manager SBI, Bhopal Circle, he has spearheaded two states, namely, MP and Chhattisgarh.

Previously, he has managed key assignments for SBI in markets like Singapore and US. He also served as CEO of the Chicago branch and then as President and CEO, SBI California.

Now, Mr Rama Mohan Rao has remained a part of the State Bank of India for almost 3 decades and has handled several key assignments, across India and abroad.

By qualification, he is an Engineering Graduate, has financial accreditations namely CFA & FRM and is a Certified Associate of Indian Institute of Bankers (CAIIB).

Mr Rama Mohan Rao Amara received a remuneration of Rs 0.11 Crores in the FY21. which amount to 0.01% of the Net Profit for FY21

(III) Mr. Ashwini Kumar Tewari (Director)

Mr. Hardayal Prasad, former Managing Director and Chief Executive Officer of the Company resigned from the directorship and CEO Position with effect from close of business hours of July 31, 2020.

Mr. Hardayal Prasad received Remuneration of Rs. 0.35 Cr for FY21 which amounts to 0.04% of the Net Profit for FY21.

Thereafter, Mr. Ashwini Kumar Tewari was appointed as the Managing Director and Chief Executive Officer of the Company with effect from August 1, 2020.

Mr. Ashwani Kumar Tewari is the Director of SBI Cards and Payment Services. Also, he is the Managing Director of State Bank of India. Prior to becoming Managing Director at SBI, he served as the Managing Director and CEO of SBI Cards and Payment Services Ltd.

He is an electrical engineer by degree and a Certified Associate of Indian Institute of Bankers (CAIIB), Certified Financial Planner (CFP) and has also done a Certificate Course in Management from XLRI.

Further, Mr. Ashwini Kumar Tewari, former Managing Director and Chief Executive Officer of the Company resigned from the directorship and CEO Position with effect from close of business hours of January 27, 2021. He resigned owing to his appointment as the Managing Director of State Bank of India..

Thereafter, Mr. Rama Mohan Rao Amara was appointed as the Managing Director and Chief Executive Officer of the Company with effect from January 30, 2021

Mr. Ashwini Kumar Tewari received a remuneration of Rs 0.30 Crores for the duration of August 1, 2020 to January 27, 2021 which amounts to 0.03% of the Net Profit for FY21

(D) Shareholding Pattern of SBI Cards and Payment Services Ltd

(E) SBI Cards and Payment Services Products Categorization

(i) Product Categorization

SBI Cards and Payment Services offers a range of credit cards to provide unmatched privileges & benefits, tailor made to meet customers’ different needs. Following are the different types of credit cards offered by SBI Cards & Payment Services:

• Lifestyle Cards such as SBI Card ELITE, Doctor’s SBI Card etc to provide lifestyle privileges & benefits
• Reward Cards such as SBI Card PRIME, Apollo SBI Card, OLA Money SBI Card & many more, that offers great Cashback, Discounts & Reward Points on spends.
• Shopping Cards such as SimplyCLICK SBI Card, SimpySAVE SBI Card, Lifestyle Home Centre SBI Card PRIME, Max SBI Card PRIME & many more, to provide exclusive shopping benefits & features.
• Travel & Fuel Cards such as Club Vistara SBI Card, Etihad Guest SBI Card, IRCTC SBI Card Premier, Yatra SBI Card & many more, specifically designed keeping in mind the needs of a traveller with unmatched travel and fuel related benefits.
• Banking Partnership Cards such as Central Bank of India SBI ELITE Card, City Union Bank SBI Card PRIME, Allahabad Bank SBI Card ELITE & many more, to provide benefits that comes from our exclusive banking relationships.
• Business Cards such as SBI Card PRIME Business & SBI Card ELITE Business, to help in growing the business

(ii) New Products Launches

During the FY21, SBI Cards and Payment Services added six new products in its portfolio

(a) AURUM Card :

SBI Cards and Payment Services has launched the AURUM Card in the super-premium segment. It is a “By invitation only” card, customer enjoys plethora of exclusive privileges and benefits.

AURUM provides experiential services like secretarial access, concierge assistance, dedicated helpline number and a dedicated portal making it one of its kind credit card best suited for the super-premium category.

(b) Paytm SBI Card

Recently SBI Card's partnered with Paytm to cater the new age, digitally savvy Customers. SBI Cards launched "Paytm SBI Card' and "Paytm SBI Card Select" with motive of ensuring best rewards and offers on shopping on the Paytm App.

(c) DMRC-SBI Card

The Company joined a hand with India’s largest metro rail company, Delhi Metro Rail Corporation (DMRC). The Cards is launched for the purpose of a contactless 7 touch-free Travel experience. Customers can enjoy some good benefits like avoiding refill queues at stations.

(d) BPCL SBI Card OCTANE

SBI Card launched a premium variant offering. This card offers industry best savings & benefits on fuel & gas spends at BPCL & Bharat Gas. Moreover, This card also gives host of lucrative travel & lifestyle benefits to its customers.

(e) IRCTC SBI Card

SBI Card Launched "IRCTC SBI Card" to Provide a Complete travel experience via travel bookings on IRCTC Portal. Moreover Company offers Lucrative offers and rewards benefits to its IRCTC SBI Card cardholder.

(f) SBI Elite and Prime Amex-SBI Card

SBI Card has tied up with American Express to bolster the Premium Portfolio with the launch of SBI Card Elite and Prime variants on AMEX network.

(F) Market Share in Card-In-forced to Customers

(i) SBI Cards & Payment Services Market Share in (Cards in force)

The company-is ranked 2nd in terms of both cards-in-force and spends on cards. It has grown to 19.1% market share (18.3% FY20) in terms of cards-in-forced to Customers.

The market share of cardholder spends improved to 19.4% for FY21 as against 17.9% in FY20 .

(ii) SBI Cards & Payment Services Market Share (Card Spends)

(iii) Market Share of Peers of SBI Cards and Payment Services Ltd

(G) Loan Book of SBI Cards & Payment Services Ltd

SBI Cards & Payment Services Ltd provides Credit to its credit card customers. Company have a wide range of credit cards catering to diverse customer segments and changing customer needs.

This includes, Super Premium card, Premium cards, Travel and shopping cards, Classic cards, Exclusive Co-Branded cards as well as Corporate cards.

(i) Loan and advances to customers

Total Loan portfolio of SBI Cards and Payment Services comprises its mainly two segment (i) 98% of Retail Segment and (ii) 2% of Corporate Segment. The Loan and advances to customers of the Company has shown a consistent and robust growth over the years.

In year 2017, the Loan and advances to customers of SBI Cards and Payment Services was ~Rs. 10305 Crore. Whereas in year 2021 It was recorded ~Rs. 25114 Crore. During the Year 2017 to 2021, The Loan and advances to customers of the company grown at CAGR of 25%.

(ii) Composition of Loan Book of SBI Cards and Payment Services

99% of Loan Book of SBI Cards and Payment Services comprises unsecured Loans and only 1% of Company's loan comes Secured category. The highest ratio of unsecured loans is just because of lending more credit to retail category and very least portion of loan provided to corporate Category.

Unsecured loans comprise of credit cards, personal and consumer durables loans, is a strong growth driver of retail credit. Secured Loans to customer includes loans secured by lien on Fixed deposits and Bank Guarantee held with third party banks

In FY21, Out of Total loan Book of Rs. 25,114 Cr, The unsecured loan stood at Rs. 24,797.58 Crore and Secured loan stood at Rs. 316.25 Cr

(iii) Customer Segmentation

Company's provides loans to different Income Groups, Age Groups and Cities.

(iv) Loan originations by Source

Company hasn't Multiple Channels and Touch Points to source Business, But Company has adopted a modern and scalable digital infrastructure that is designed to aid customer convenience and enhance its digital capabilities.

Moreover, Company has invested in its core technology Systems to Tap the more customers.

To influence the Business, Company has partnership with various types of Brands. Such as Amazon India, Max fashion, landmark Group, Tata Group, IRCTC, Paytm, JIO, BPCL, etc.

Co-Branding with such brands can be a good advantage to acquire more market share in terms of customers as well as spends.

(H) Borrowing Mix

SBI Cards and Payment Services Ltd has well-diversified Resource Profile. Company also benefits from the strong brand image of its parent, State Bank of India, and enjoys good financial flexibility with access to diverse funding sources at competitive Rates of Interest.

There has been a continuous shift in sourcing of borrowings from Bank facilities to Market borrowings on account of competitive borrowing costs in the Debt Market

Over the Years, Company has arranged major source of funds from bank lines.

In FY20, Company's Borrowing through Banks were recorded 59%, Borrowing though Commercial Paper 15% and Debentures 26%.

Whereas in FY21, Company's Borrowing through Banks were recorded 60% (increased by 1%), borrowing through Commercial Papers reduced to 12% from 15% and Debentures increased to 28% from 26%.

(I) Interest Parameters

(i) Interest Income

Company’s Interest Income includes Interest on Loans & Advances, Interest Income from Investments, Interest on Deposits with Banks and Other Interest Income. Over the years, Company's Interest Income has shown a constant and robust growth. In F.Y. 2021 Interest Income grew to INR 4927.67 crore from INR 4841.30 crore in the previous year.

On the other hand, Company’s Interest Income grew at a CAGR of 31% over last 10 Fiscal years.

(ii) Interest Expenditure

Over the Years, Company's interest expenditure increased rapidly. But in the FY21, Company's interest expenditure decreased to INR 1,043.40 Cr.

(iii) Net Interest Income SBI Cards and Payment Services

SBI Cards and Payment Services Ltd.'s Net Interest Income has grown at a CAGR of 34% over last 10 Financial years, showing a significant and constant growth.

In the Fiscal Year 2021, Company’s Net interest Income grew by nearly 10% to INR 3884.27 crore as against INR 3540.37 crore in the previous year.

(iv) Net Interest Margin

Company’s Net Interest Margin jumped in the FY 2018 from 15.30% to 16.50%. Whereas from FY19 to FY20 It has shown very constant growth.

(v) Composition of Total Income

(J) Operational Parameters - SBI Cards & Payment Services

(i) Gross NPAs to Gross Advances (%)

(ii) Net NPAs to Net Advances (%)

Company’s Asset Quality is quite stable over the years. Company’s Gross NPA increased to 4.99% against 2.01% in the Previous fiscal Year.

On the other hand, Net NPA also increased to 1.15% in 2021 against 0.67% in the previous Fiscal Year.

(iii) Capital Adequacy Ratio (%)

The company’s CAR increased by 9.12% during the past 5 years. Moreover, In FY21 company has Recorded an appreciation of 2.4% from the Previous Fiscal Year.

(iv) Yield On Advances (%)

Over the years, Yield On Advances of SBI Cards and Payment Services has shown volatile growth. In the year 2021, Company’s Yield on Advances de-grew to 20.10% from 21.70% in the previous Fiscal year

(v) Advertisement and Sales Promotion Expenses

In FY21, SBI Cards & Payment Services Ltd spent 15.95% of Net Sales on Advertisement and promotion Expense Against 17.13% in FY20.

(K) Financial Parameters

SBI Cards and Payment Services Ltd.'s Operating income has shown a robust growth over the years. Its operating income grew at a CAGR of 33% over the last 10 Financial Years.

The Company's given an impressive Profit growth over the last 10 years and grew at a CAGR of 44%.

The company’s PBIDT Margin has grown well during the 10 years. Whereas, PAT Margin has shown mixed growth over the last 10 years.

The company has been maintaining a healthy track record of Return On Assets (ROA) and Return On Equity (ROE) over the past 10 years.

The Dividend payout Ratio of the Company has shown mixed cues during the 10 years. Between FY12 to FY14, It was nil but in FY15 and FY17, it has shown good growth.

(L) Management Discussion & Concall Highlights

• SBI Cards & Payment Services sourced 26.9 Lakh new accounts in FY21 Vs 34.1 Lakh in FY20.
• SBI Cards & Payment Services is Focused on improving its portfolio in the premium segment. The company has launched an Aurum credit card in Q4FY21 with an annual charge of Rs.10,000. Co also launched BPCL Octane and IRCTC premium cards in FY21. For the premium segment, Company has premium servicing channels to generate good revenues.
• The company continued strong growth momentum in spends. Retail spends for FY21 were at H 102,414 Cr.
• The company has witnessed robust growth in contactless transactions. As on March, 2021, around 1 out of every 4 retail point of sale transaction was a contactless transaction.
• The company continued to build on higher number of online spends with share of online spends at 52% of retail spends.
• Company's focus is on increasing high-quality new account acquisitions from open market and cobrand distribution channels.

Q2FY22- Concalls highlights

• New accounts registered a strong growth during Q2FY22, with a spike of 56% at 953,000 as compared to Q1FY22
• Costs could remain slightly elevated as company intends to invest in technology
• Card-in-force grew by 14% to 1.26 Cr as of Q2 FY22 vs 1.10 Cr as of Q2 FY21.
• Retail spending grew by 41% to Rs 35,070 Cr in Q2 FY22 vs Rs 24,863cr in Q2 FY21. Corporate Spends grew by 80% to Rs 8,491 Cr in Q2 FY22 vs Rs 4,728 Cr in Q2 FY21
• The Market share of the Company in H1 FY22 – Card-in-force at 19.4%
• Company's Gross NPA at 3.36% as of Q2 FY22 vs 4.29%* as of Q2 FY21
• Company's Net NPA at 0.91% as of Q2 FY22 vs 2.70%* as of Q2 FY21.

Q1FY22- Concalls highlights

• New accounts volume at 609 K accounts for Q1 FY22 up by 111% as of 288K accounts for Q1 FY21
• Card-in-force grew by 14% YoY to 1.2 Cr as of Q1 FY22.
• Spends grew by 74% YoY at Rs 33,260 Cr for Q1 FY22.
• Market share Q1 FY22 (available till May21) – Card-in-force at 19.2% (Q1 FY21: 18.3%)
• GNPA at 3.91% as of Q1 FY22 vs 1.4% as of Q1 FY21; NNPA at 0.88% as of Q1 FY22.

(M) Opportunities

(a) Less Penetration's in the Payment Industry

India is a highly under penetrated market, with the average card ownership per 100 people being 4, compared to 105 in Brazil, 26 in Russia, 53 in China, 79 in Australia, 92 in UK and 331 in the USA. This represents a huge potential to increase credit card penetration in India.

(b) Infrastructure of Digital Economy

-Acceptance infrastructure inclusive of Point of sale (POS) and BQR terminals (Person to Merchant) has seen over 2.5X growth in last 3 years and initiatives like acceptance development fund are further expected to grow.

-QR Based Payments in increased in the past years. Users are shifting from cash payment to QR Based Payment which is done through Payment Apps. Ease in use helps the users more to connect more rapidly.

(N) Strengths

(a) Strong support from majority parent

SBI Cards and Payment Services (SBICPSL) is a subsidiary of India’s largest and oldest bank i.e. SBI. receives Strong financial, managerial and branding support from its parent SBI Bank and ~70% of Stakes in SBI Cards and Payment Services is held by SBI bank.

(b) Improving market position

Over The Years Company's Market Share increased constantly from 13% in F14 to 19.4% in FY21. SBI Cards and Payment Services Ltd is currently the second-largest player in the credit card industry, both by the number of cards in force and by spends. The company had around Rs 25,114 crore in gross card receivables as of March 31, 2021.

(c) Above-average profitability

SBI Cards and Payment Services has an average RoA of 4.6% for the last five fiscals, supported by the healthy net interest and fee income. Moreover, RoA declined to 3.8% in fiscal 2021 from 5.5% in fiscal 2020, largely on account of higher credit costs. whereas, Provisioning cost increased to Rs 2,700 crore in fiscal 2021 from Rs 1,940 crore in the previous fiscal.

(O) Risk Concerns

Monoline nature of business & Credit Risk

The product diversification of SBICPSL remains low, being concentrated only in the credit cards business.

Credit risk is the risk of a financial loss if the customer fails to meet their contractual obligations. Being a credit card company with retail & corporate portfolio being the earning assets, credit risk arises from all transactions that give rise to actual, contingent, or potential claims against any borrower.

Also, the company’s portfolio remains relatively risky because it is largely unsecured with only 1.3% of the portfolio being secured in nature as on March 31, 2021