SBI Cards deal in limbo over private equity players as likely buyers

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Published: March 22, 2016 5:38:48 AM

With joint venture partners State Bank of India (SBI) and GE Capital differing over the potential buyers for GE’s stake in SBI Cards, the stake sale has hit a roadblock, reports Deborshi Chaki in Mumbai.

sbiSources say that a number of PE funds like KKR, Baring Asia and some strategic players including the Tata Group (backed by Tata Consultancy Services and Tata Capital) have shown interest but PE players have clearly outbid the rest. (Express photo)

With joint venture partners State Bank of India (SBI) and GE Capital differing over the potential buyers for GE’s stake in SBI Cards, the stake sale has hit a roadblock, reports Deborshi Chaki in Mumbai.

Essentially, SBI is unhappy with GE’s shortlist of global private equity (PE) players as potential buyers, persons in the know conveyed to FE. The lender, they pointed out, is not comfortable with a financial investor and would prefer a strategic partner with domain expertise who can contribute to the business.

Company executives close to the development say the disagreement on the profile of the potential buyers is threatening to delay the stake sale. GE Capital is believed to have hired Morgan Stanley to advise it on the transaction.

“SBI has provided GE Capital with a list of firms who could be approached,” a senior executive from SBI Cards, who did not wish to be named, said.

Meanwhile, the lender is also checking out whether it can legally veto a deal should the GE Capital stake fall into the hands of a financial investor.

Sources say that a number of PE funds like KKR, Baring Asia and some strategic players including the Tata Group (backed by Tata Consultancy Services and Tata Capital) have shown interest but PE players have clearly outbid the rest. Earlier this month GE Capital India sold its auto leasing, healthcare financing and corporate lending and leasing business to private equity fund Aion Capital Partners and ex-GE Capital executives Pramod Bhasin and Anil Chawla for an undisclosed sum.

SBI Cards operates through two separate entities. The first is SBI Cards and Payment Services (SBICPSL), a marketing and distribution arm in which the bank has a majority stake. The second is GE Capital Business Processes Management Services, which takes care of back-office and IT functions and in which the lender controls around 40%. In the first nine months of FY16 SBI Cards reported a net profit of `218 crore, which is around 13% lower year-on-year. It is currently the third largest player with a customer base of over 2.8 million. Experts estimate GE’s stake in the company could be valued anywhere between `2,500 crore and `3,000 crore.

When contacted, a GE Capital spokesperson said GE’s exit from SBI Cards “is in line with the company’s global strategy with regard to GE Capital, announced on April 10, 2015. We have received strong interest from various players. GE Capital and SBI are engaged in the process of jointly evaluating the option to bring in a strong partner. We are in an early stage and will provide further details when the process concludes.” An email sent to SBI in this regard remained unanswered till the time of going to press.

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