Global private equity firm Carlyle Group is set to acquire GE Capital’s stake in SBI Cards & Payments Services Pvt. Ltd (SBI Cards), a joint venture between the US-based company and India’s largest lender State Bank of India (SBI), according to two media reports.
The deal size is expected to be close to Rs 2,000 crore (around $305 million) and will value the entity at Rs 7,600 crore (around $1.16 billion), The Economic Times reported.
The transaction will help SBI increase its shareholding in the credit card business to up to 74% while the remaining stake will be held by Carlyle.
The PE firm has partnered with US-headquartered IT major Cognizant for the deal. However, Cognizant will not bring in any equity but only provide technology support as a preferred vendor, the report said.
Carlyle has trumped Japanese financial services firm Credit Saison and US private equity group Warburg Pincus to emerge as the front-runner for picking GE Capital’s stake in the joint venture, Mint reported and added that SBI’s board has settled upon Carlyle as the final bidder.
Carlyle has previously made impressive returns on its investments in the financial services space. The firm netted two times returns when it sold its entire stake in mortgage lender Housing Development Finance Corp for $840 million (Rs 4,338 crore then) four years ago. It also made nine times returns on its bet on Repco Home Finance when it fully exited the housing finance company three years ago.
Carlyle’s possible investment in SBI Cards also comes on the back of its multi-bagger exit from Edelweiss Financial Services earlier this month. Once closed, the investment in SBI’s credit card business is expected to strengthen its existing financial services portfolio which includes PNB Housing Finance.
SBI entered the credit card business in 1998 by partnering with GE Capital India. SBI Cards currently has a 15% market share in the credit card space in the country. It mainly competes with credit card units of HDFC Bank and ICICI Bank.
Carlyle did not immediately respond to an email query while Cognizant declined to comment.
GE’s bid to divest stake
GE has been divesting its non-core assets globally to focus on its core industrial manufacturing activities.
In India, GE sold its NBFC business to AION Capital Partners for around $350 million last year.
It also sold its housing finance business in the country to PE-backed Magma Fincorp a few years ago.
Globally, the conglomerate has been under pressure to hive off its profitable but risky financial services assets. In 2015, the world’s top alternative assets manager Blackstone and American financial services firm Wells Fargo inked an agreement to buy almost all of the assets of GE Capital Real Estate in a transaction valued at about $23 billion.
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