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Carlyle to buy 26% in State Bank of India’s credit card ventures

21 July, 2017

Global private equity firm Carlyle Group will acquire a 26% stake in State Bank of India’s two credit card joint ventures after GE Capital decided to exit the companies.

The state-run lender has two credit card JVs—SBI Cards & Payments Services Pvt. Ltd and GE Capital Business Process Management Services Ltd. SBI Cards issues credit cards to customers and processes transactions while the other JV manages the technology and processing needs of the former.

As of March 2017, SBI owned about 60% of SBI Cards and 40% of GE Capital Business Process.

India’s largest lender has now increased its stake to 74% in both ventures, it said in a stock-exchange filing on Friday. Carlyle acquired the remaining stake. The filing didn’t disclose the deal value.

Several media reports in the past had pegged the deal size to be close to Rs 2,000 crore (around $305 million) and valued the JVs at Rs 7,600 crore (around $1.16 billion).

The transaction is likely to close by the fourth quarter of 2017.

Dinesh Kumar Khara, managing director in charge of associates and subsidiaries at SBI, said the cards JVs are looking to capitalise on the growing opportunities in India as cashless transactions increase.

According to SBI’s annual report, SBI Cards grew its card base by 15% and posted a profit after tax of Rs 390 crore for 2016-17 as against Rs 284 crore the previous year.

Carlyle reportedly trumped Japanese financial services firm Credit Saison and US private equity firm Warburg Pincus to emerge as the buyer of GE Capital’s stake.

Carlyle is investing in SBI Cards through affiliate Carlyle Asia Partners IV, its fourth Asia buyout fund that focuses on control deals and makes significant minority investments in established companies across Asia excluding Japan.

The PE firm has been investing in India since 2000 but has increased its exposure to the country in recent years.

It has invested about $1.6 billion of equity in more than 30 transactions in India as of March 2017.

This is Carlyle’s second venture with a state-run lender in India. It had earlier acquired a 49% stake in PNB Housing Finance Ltd, a joint venture with Punjab National Bank.

The mortgage lender floated its initial public offering last year. PNB Housing is now Carlyle’s third-largest public position with a fair market value of over $1 billion, according to the PE firm’s earnings call for the first quarter of 2017.

Meanwhile, GE has been focusing on its high-value industrial businesses and is selling most of GE Capital assets.

GE has retained the financing businesses that relate directly to GE’s industrials. So far, it has signed and closed agreements for the sale of about $200 billion of businesses.

In India, GE sold its non-banking finance business to AION Capital Partners for around $350 million in 2015. It also sold its housing finance business in the country to PE-backed Magma Fincorp a few years ago.

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Carlyle to buy 26% in State Bank of India’s credit card ventures

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