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ICICI Securities Report
RBL Bank Ltd. has snapped its long-standing co-branded credit card ties with Bajaj Finance Ltd. The parting of ways is due to significant change in product synergies over time. As of Q2 FY25, Bajaj Finance formed ~65% of the outstanding cards and 50-55% of receivables. However, contribution to incremental sourcing has diminished significantly to 41% (versus 65% YoY), as RBL has been diversifying to other partners and ramping-up its own direct sourcing.
As per the bank, BFL may exit from the cobranded product altogether. Albeit a tad unexpected, we see this move as appropriate from a risk management perspective. Even so, this comes at a time when RBL's other unsecured segment (MFI) is undergoing challenging times (sharp rise in stress).
In our view, a slowing in high-yielding unsecured retail may impact overall growth (as unsecured retail has been cross-subsidising sub-scale secured retail) and RoA. Despite inexpensive valuations, we downgrade the stock to Hold.
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