Shares of SBI Cards and Payment Services fell more than 3 percent on Monday after Goldman Sachs initiated coverage on shares of SBI Cards with a ‘sell’ recommendation. It has assigned a target price of Rs 654 which is about a 28 percent downside from the current level.

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At 10:47 am, shares of SBI Cards were down 2.3 percent at Rs 907.25 on BSE. SBI Cards stock is trading lower than 5, 20, 50, 100 and 200-day moving averages which indicated the bearish momentum in the shares.

In the past three months, the share price has declined 20 percent.

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Even as the company has retained its market share and was profitable during the COVID crisis, the brokerage firm sees headwinds intensifying in the future due to competition, regulations which may lead to a slower growth trajectory.

The brokerage firm sees three challenges for SBI Cards going ahead:

The increasing popularity of alternates like Buy-Now-Pay-Later

Regulatory changes such as a challenge to MDR/interchange rate which could potentially impact fees (c.50% of revenues)

Competition from capital-rich fintechs & banks

Further, rich valuations have led the risk-reward ratio to become unfavourable, Goldman Sachs said.

The brokerage firm expects earnings growth to moderate to 18 percent in FY22-25 as compared to 27 percent in FY17-21.

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First Published:Jan 10, 2022 11:23 AM IST