BoB seeks bids for divesting 49% stake in credit card arm

State-owned Bank of Baroda has called bids for divesting up to 49% stake in its credit card subsidiary BoB Financial Solutions, as per a notice on the latter’s website.

As per the tender, the last date for submission of queries is March 24, while the last date for submitting expression of interest by investors is April 10, 5 pm.

“BoB Financial is desirous to bring in a suitable partner and also leverage its growth potential to enlarge presence and market share substantially. To achieve this, BoB Financial needs additional capital to meet its business growth and upgrade infrastructure,” the notification said.

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Bank of Baroda is the 9th largest card issuer in the country, with 17.5 lakh active cards in force.

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At the same time, total spends stood at Rs 12,155 crore during 9MFY23, as against Rs 7,168 crore of spends in FY22.

Further, for the nine months ending December 2022, BoB Financial’s reported net loss widened to Rs 14 crore as against Rs 10 crore of net loss in the previous fiscal.

The company’s total income increased to Rs 596 crore during April-December, from Rs 500 crore in FY22.

Total expenses of the company also rose from Rs 506 crore in FY22 to Rs 616 crore during April-December.

Net non-performing asset ratio of the card company stood at 1% as on December end, while capital adequacy ratio stood at 17.8% during the same period.

Kaitav Shah, BFSI research analyst at Anand Rathi Institutional Equities, says price mutliples for BoB Finanial Solutions stake sale deal will vary based on growth rate of last 2 years and other profitability metrics.

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“Generally, if you look at SBI Cards, when they reached a certain size they divested some stake and that is when the next round of growth came in for the company and they were able to retain people and offer ESOPs and so on to their employees.”

The Carlyle Group in 2017 had invested Rs 2,000 crore in SBI Cards for a 26% stake in the company.

It completely exited SBI Cards in 2022.