Global PE funds shortlisted for GE stake in SBI Card

by / Wednesday, 20 April 2016 / Published in News & Updates

The value of GE Capital’s stake in SBI Card is estimated at about $400 million

Mumbai: As many as eight investors, including global private equity funds KKR and Co., Bain Capital and General Atlantic Llc, have been shortlisted for the purchase of GE Capital Corp.’s stake in a credit card joint venture with State Bank of India (SBI), according to two people close to the development.

The value of GE Capital’s stake in SBI Card is estimated at about $400 million (Rs.2,680 crore), said one of the people cited above, requesting anonymity.

SBI Card operates through two separate companies—SBI Cards and Payment Services Pvt. Ltd (SBICPSL), which markets and distributes SBI credit cards, wherein State Bank of India (SBI) holds 60% and GE Capital holds 40%; and GE Capital Business Processes Management Services, which handles the technology and processing needs, wherein SBI holds 40% and GE Capital 60%.

GE Capital will sell its stake in both entities, said the second person cited above, also on condition of anonymity.

Morgan Stanley is advising GE Capital on the deal while SBI is being advised by Barclays Plc.

“The names of shortlisted private equity firms include KKR, Bain Capital and General Atlantic,” said the first person, adding that other potential investors include Baring Private Equity Asia, Warburg Pincus, DBS Bank Ltd and Temasek Holdings Pte Ltd.

Spokespersons of General Atlantic, Baring Private Equity Asia, DBS, Bain Capital, Temasek, Warburg Pincus and Barclays declined to comment.

Emails sent to KKR and Morgan Stanley did not elicit any response.

A GE Capital spokesperson said: “GE Capital is exploring options to exit the SBI Card Joint Venture which is in line with GE’s global strategy with regard to GE Capital, announced on April 10, 2015. GE Capital and SBI are engaged in the process and at this stage we have no further details to share.”

SBI Card is the second largest credit card issuer in the country. It has 3.47 million cards in the market, trailing behind HDFC Bank Ltd, which has 6.1 million cards. ICICI Bank Ltd had 3.46 million cards outstanding as of November 2015, according to Reserve Bank of India data.

In terms of user spending, SBI Card’s market share rose to 11.2% in FY15 from 11% in the previous fiscal and its net profit was Rs.267 crore during the year ended 31 March, according to SBI’s annual report.

“GE Capital’s exit from the joint venture with SBI is the result of their decision to exit the financial business globally. Currently the stakeholders are looking for a suitable partner to join the SBI Card JV and have issued a letter inviting expression of interest. Such large-scale processes take considerable time to come into effect. We are collectively working towards ensuring a smooth transition and will share relevant details in due course of time,” said an SBI Card spokesperson.

Last week, GE Capital announced plans to sell its financial service businesses in India to AION Capital Partners, an India-focused special situation fund, along with former GE Capital executives Pramod Bhasin and Anil Chawla.

Parent GE has been in the process of selling the businesses of GE Capital across geographies.

The credit card business in India has stabilised in recent years after a spurt in defaults in 2008-09.

Card spends in India grew 28% in FY15 from a year earlier, faster than the 24% in the previous year, stated an August 2015 report by Worldline, an electronic payment services company.

Consumers spent Rs.1.9 trillion through credit cards and Rs.1.2 trillion through debit cards. The report, India Card Payments Report for 2014-15, said transaction expenditure of credit cards at points of sale increased to Rs.190,000 crore in FY15 from Rs.75,500 crore in FY11.

“Within the financial sector, retail financial services will attract the maximum investor attention. Credit card business is in high-growth phase due to increasing online transactions. Particularly, SBI has shown resilience to adapt to newer fin-tech solutions such as digital wallets, money transfers, etc. Private equity players will leverage SBI’s experience and huge retail customer base to create further value in retail financial services business,” said Mahesh Singhi, founder and managing director of Mumbai-based investment bank Singhi Advisors.

SBI entered the credit card business in 1998 by tying up with GE Capital. In 2006, it expanded by launching co-branded cards with Indian Railways, SpiceJet Ltd and Tata group. In 2014, SBI Card launched STYLEUP Card, another co-branded card in partnership with Fashion at Big Bazaar.

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