SBI, Carlyle to buy out GE Capital’s 26% stake in SBI Card
Beena Parmar
Moneycontrol News
State Bank of India (SBI) and marquee private equity investor Carlyle Group will acquire GE Capital Group’s entire 26 percent stake in SBI Card.
SBI Card is a joint-venture between SBI Cards and Payment Services and GE Capital Business Process Management Services, which issue credit cards and process card transactions.
Following the transaction, SBI and Carlyle will own 74 percent and 26 percent, respectively, in each of the two entities. Further details of the transaction were not disclosed. According to reports, Carlyle was in talks to buy the 26 percent stake for Rs 2,000 crore.
At present, SBI owns 60 percent in the joint venture.
The equity for this transaction will come from CA Rover Holdings, affiliated entity of Carlyle Asia Partners IV, Carlyle’s fourth Asia buyout fund. Carlyle has invested approximately USD 1.6 billion of equity in more than 30 transactions in India across all Carlyle funds as of March 31, 2017.
The transaction is expected to close by the fourth quarter of 2017, subject to regulatory approvals, Carlyle said in a statement.
This comes when SBI has emerged as the second largest player in the credit card business with 46.8 lakh cards after HDFC Bank at 87 lakh cards and ICICI Bank at 42.8 lakh cards as on April end.
SBI is also in the second spot in total card spend. The total spend per card for the month of April for SBI stood at Rs 1065 while for HDFC Bank it was at Rs 1127, while for ICICI Bank it was much lower at Rs 869.
SBI Card Managing Director Vijay Jasuja had recently told Moneycontrol he wants SBI Card to be the market leader as soon as possible. “We want to penetrate the entire SBI customer base from 35 percent at present. But we should be market leaders in the next 2-3 years’ time,” he said.
At present, SBI has a 15 percent market share of the card business in India, led by HDFC Bank, which has around 30 percent share. This is followed by Citi, ICICI Bank and American Express that account for over 75 percent of credit card spend in India.
As on April end, HDFC Bank has the largest number of credit cards in the industry at 87 lakh followed by SBI at 46.8 lakh and ICICI Bank at 42.8 lakh cards.
Dinesh Kumar Khara, Managing Director (A&S), SBI, said, “We welcome Carlyle, our new partner, in the credit card business, and look forward to the new partnership capitalising on the significant opportunities that are opening up in the Indian market, especially in these interesting times of majorly cashless transactions.”
Other shortlisted bidders Credit Saison of Japan and Warburg Pincus had also shown interest after GE decided to sell shares in the two decade-old JV.
With the digital push, SBI also has plans to install card swipe machines with 10 lakh merchants which will increase acceptance of cards and increase sale of more products.
In FY17, SBI Cards reported a profit before tax of Rs 598 crore, a growth of 37 percent compared to the previous year.