Life Insurance Corporation of India (LIC), the largest institutional investor in the country, has increased its stake in SBI Cards & Payments Services Limited, the second-largest credit card issuer in India. LIC acquired more than three lakh shares of SBI Cards through open market purchases on February 9, 2024, taking its shareholding from 4.99% to 5.02% of the paid-up capital of the company.
About SBI Cards
SBI Cards is a non-deposit accepting systemically important non-banking financial company (NBFC) registered with the Reserve Bank of India (RBI). It is engaged in issuing credit cards to consumers and businesses in India. It has a market share of 19.5% in terms of the number of credit cards outstanding and 20.3% in terms of credit card spends as of December 31, 2023.
Reasons for LIC investment
LIC’s investment in SBI Cards is seen as a positive sign for the credit card industry, which has been recovering from the impact of the COVID-19 pandemic. The credit card business is expected to grow at a compound annual growth rate (CAGR) of 25% over the next five years, driven by increasing digital payments, rising disposable income, and low penetration of credit cards in India.
Details of LIC acquisition
According to a filing by LIC on February 12, 2024, the insurer acquired 3,01,084 shares of SBI Cards at an average price of ₹716 per share, amounting to ₹21.55 crore. The filing also stated that the acquisition was done as an investment function and not as a related party transaction. LIC is one of the largest shareholders of State Bank of India (SBI), the parent company of SBI Cards, with a stake of 8.6% as of December 31, 2023.
Performance of SBI Cards
SBI Cards reported a net profit of ₹313 crore for the quarter ended December 31, 2023, up by 52% year-on-year. Its total income increased by 6% to ₹2,540 crore, while its total expenses decreased by 9% to ₹2,027 crore. Its asset quality improved as its gross non-performing assets (NPAs) ratio declined from 4.29% to 1.61% and its net NPA ratio declined from 1.12% to 0.56%.
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