Twitter
Advertisement

State Bank to pay Rs 1,200 cr for 74% stake in merged SBI Cards entity

New partner Carlyle will put in Rs 700 crore for acquiring a 26% stake in the new company

Latest News
article-main
FacebookTwitterWhatsappLinkedin

State Bank of India (SBI) will cough up Rs 1,200 crore for owning 74% equity in the merged entity of its credit card and technology & process management businesses while new partner Carlyle will put in Rs 700 crore for acquiring a 26% stake, a source close to the development said.

GE Capital will take home Rs 1,900 crore to exit SBI Cards and GE Capital Business Processes Management Services Ltd, where it held a 40% stake and 60% equity respectively. SBI owned a 60% stake in SBI Cards and 40% in GE Capital Business Processes Management Services Ltd, the company which handles the technology and processing needs of SBI Cards.

"We are in effect upping our stake. The merger of SBI Cards and GE Capital Business Processes Management Services is expected to take place within nine months," SBI Cards chief executive officer Vijay Jasuja told DNA Money, while declining to confirm the deal size.

Under the present structure, SBI Cards and GE Capital Business Processes Management Services operate as two separate companies. SBI and Carlyle will buy out GE Capital's stakes in these two firms and subsequently bring them under one entity.

"Having a foreign partner helps bring in best global practices," said Jasuja.

SBI Cards is one of the fastest card issuing companies in the country, with 300,000 cards being added in a month. This is currently higher than the largest card issuer HDFC Bank's addition of about 230,000 cards a month. With a 16% market share and 5.6 million cards in circulation, SBI Cards is the second-largest card company in the country, behind HDFC Bank which has about 9.6 million cards.

The company's focus is to aggressively market the credit cards to the 500 million customers of SBI. To date, SBI credit card is held only by 2.2 million of the bank's customers.

"So we have a great opportunity to grow. We are already giving credit cards to all our HNI customers and salary account holders and wealth management customers. Keeping with the customer profile of SBI, we have various product categories addressing the needs of each strata of the customer base," said Jasuja, who has been instrumental in posting aggressive growth for the company.

The company's profits grew 45% over the previous year. It reported profit before tax of Rs 500 crore for the first half of the current fiscal.

"We are looking at launching a number of co-branded cards targeting customers with specific needs. Though other players in the market are doing this, we see to it that customers actually enjoy the benefit of a cash back. We credit the cash back to the customer's accounts, which then gets adjusted against the payments,' Jasuja said.

CONSOLIDATION TIME

  • New partner Carlyle will put in Rs 700 crore for acquiring a 26% stake in the new company
     
  • GE Capital will take home Rs 1,900 crore to exit SBI Cards and GE Capital Business Processes Management Services
Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement