Private equity funds such as KKR, Bain Capital and Baring Asia, Capital One and Fiserve Inc and domestic NBFCs such as Tata Capital are among those believed to have been sounded out as GE Capital BSE 0.18 % gears up to exit SBI Cards, its credit cards joint venture with State Bank of India BSE 2.17 %. In April, GE had taken a call to sell a majority of assets under GE Cap world wide as part of its decision to exit financial services and concentrate on its traditional industrial businesses.
GE Capital is exploring options to exit the SBI Card joint venture which is in line with GE’s global strategy with regard to GE Capital. GE Capital and SBI are at a very early stage in the process and no timelines have been defined. SBI has entered the credit cards business in 1998 by partnering GE Capital India. The JV operates through two separate companies, SBI Cards & Payment Services and GE Capital Business Processes Management Services. At the end of fiscal year 2014-15, SBI Cards clocked profits of just over Rs 300 crore, with the flagship marketing and distribution company posting the lion’s share- Rs 266 crore.
The minimum valuation expected for the two JVs is Rs 4,500-5,000 crore. Some even feel that heightened competition may see valuations touch the billion-dollar mark. GE’s stake alone could fetch Rs 2,000 crore at the least. KKR, Bain and Fiserve Inc declined to comment on what they termed as market rumour and speculation. With ecommerce and Net banking, the world of payments is converging and the various channels, credit and debit cards, mobile payments, Internet banking have all become complementary, feeding into each other.
For SBI Card, a little less than 50 per cent of its card base is from SBI while 35-37 per cent is from the open market. The remaining 13-15 per cent is through co-branded cards with a diverse set of partners such as Future Group, Capital First, IRCTC, Air India and a host of PSU banks. It also runs two white label cards for Tata Capital and Bharatiya Mahila Bank.
Taxation is a big issue in the entire sector. If they merge with the bank then they will not be able to play across the entire spectrum of tie-ups and co-branding. Interestingly, earlier this March, Varde Partners, KKR & Co and Deutsche Bank bought out GE’s Australia and New Zealand financial services unit at an enterprise value of $6.3 billion in what has been described as one of the region’s largest private equity deals. The unit used to offer GE branded credit cards and personal loans. KKR is also listing electronic payments processor First Data to raise $2.5 billion in what could well be the year’s biggest initial public offer in the US.
