India: Carlyle Group leads the race to buy GE Capital’s stake in SBI Card

Global private equity (PE) firm Carlyle Group has emerged as the front runner for GE Capital Corp.’s stake in SBI Card, the credit card joint venture between the US-based company and India’s largest lender State Bank of India (SBI), at least two people privy to the matter told Mint.

“Carlyle has emerged as the front runner for GE Capital’s stake in SBI Cards for somewhere around $325 million,” one of the two people cited above said.

“The board of SBI settled upon the final bidder in a meeting last Friday,” the second person said, adding, “Carlyle has pipped Warburg Pincus and Credit Saison and emerged as the final bidder though the deal is not closed yet.”

In response to an email query, GE Capital said, “GE Capital’s exit from SBI Card joint venture entities is in line with GE’s global strategy with respect to GE Capital. The process is still ongoing and we will share details when the process concludes.”

Emails sent to the spokespersons of Warburg Pincus and SBI seeking comments and information on the development had not elicited any response at the time of filing this report. Carlyle declined to comment. A spokesperson from Credit Saison was not immediately available for comment.

The proposed bid will be further evidence of Carlyle’s growing interest in the Indian financial services space. In its first major buyout in India, Carlyle had purchased the bulk of the business of New Silk Route-controlled financial services firm Destimoney in February 2015, which also resulted in an indirect acquisition of a 49% stake in PNB Housing Finance Ltd. Its stake however dropped to around 37% after the latter went public in October last year.

SBI entered the credit cards business in 1998 by joining hands with GE Capital India, the consumer finance arm of GE Capital Corp.

SBI Card operates through two separate companies—SBI Cards and Payment Services Pvt. Ltd (SBICPSL), which markets and distributes SBI credit cards, wherein 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%.

Last week, the Indian lender received the board’s approval to raise its stake in both entities for Rs1,160 crore.

In SBICPSL, the bank will increase its ownership from 60% to 74%. In GE Capital Business Processes Management Services, the lender will increase its holding from 40% to 74%. Following this, GE will owns 26% stake each in SBICPSL and GE Capital Business Processes Management Services.

SBI Card is currently India’s third-largest credit card player with over 4 million credit card customers, as per the information available on the company’s website.

It has offices in over 90 cities in India and an extensive product portfolio, which includes premium, classic, travel and shopping, exclusive and corporate cards, to cater to both individual and corporate needs.

The Carlyle Group is a global alternative asset manager with $158 billion of assets under management (AUM) across 281 investment vehicles. In emerging markets, Carlyle manages seven private equity fund families with total AUM of $11 billion.

Carlyle is raising $1 billion under its new Asian growth fund largely focused on investing in India and China. It has roped in International Finance Corp (IFC) as one of its limited partners (LPs), with the private sector investment arm of World Bank committing $25 million to the fund.

This fund will target small buyout and late-stage growth capital investments primarily in China and India and opportunistically in South Korea.

In India, some of its investments include PNB Housing Finance, Metropolis Healthcare Ltd, Dee Development Engineers Ltd, Global Health Pvt. Ltd and Newgen Knowledge Works Pvt. Ltd.

Buyouts are on the rise in India and the trend is only going to accentuate going forward, according to speakers at the Mint Private Equity Conclave 2017 held in Mumbai recently.

Over the last three years, control deals or buyouts have shown a significant rise in India, with controlling stake deals up to 30% of the overall deal value in first half of 2016 compared to about 8% three years ago, shows a survey of over 20 PE firms active in India, conducted by A&M’s Performance Improvement group, Mint reported in December.

Some of the top buyout deals of last year included Blackstone Group LP’s $1.1 billion acquisition of a majority stake in listed IT firm Mphasis Ltd, Kedaara Capital and Swiss PE firm Partners Group’s purchase of mortgage lender AU Financiers for around $140 million and Abraaj Group’s $221 million deal to buy Care Hospitals

Also read:

India: First Carlyle Ventures sells 9.2% in Edelweiss, scrip soars

IFC may invest up to $25m in Carlyle’s fifth Asia fund

(Anuradha Choudhary, Gopika Gopakumar and Reghu Balakrishnan)

This article was first published on Livemint.com