Carlyle gets $543m through partial exit from India's SBI Card

The private equity firm offloaded 40 million shares for INR985.98 apiece, according to bulk trading data. It retains an 11.6% interest in SBI Card worth around INR109 billion. The stock closed down 4.93% at INR970.55 on March 17, the day the trade was announced. It reclaimed some of this lost ground the following day, closing up 2.63% at INR1,004.

SBI Card is India’s second-largest credit card company after HDFC Bank and by far the leading pure-play card issuer. Carlyle bought a 26% stake from GE Capital for about $274 million in late 2017. State Bank of India held the rest.

The company went public in March 2020, raising INR98.1 billion in India’s fifth-largest IPO on record. The offering was priced at INR755 per share, giving SBI Card a market capitalization of INR710 billion. Carlyle offloaded 10% of its holding, generating proceeds of INR70.4 billion.

At the time of its investment, the private equity firm recognized that SBI Card was laying the groundwork for massive scaling and a future as the only player of its kind on the domestic bourses. Management was on the right trajectory, so all that was needed was light-touch support.

“The role we and SBI played was to empower the management, make sure they felt supported, and give them the resources they needed without any pressures around maximizing quarterly numbers. The most important thing is to have strong alignment between stakeholders and to provide management with the room to do well,” Sunil Kaul, a managing director at Carlyle, told AVCJ last year.

Early initiatives included merging SBI Card with a separately operated backend unit called SBI Business Process Management Services. This streamlined issues around regulation and compliance, facilitated improvements in technology infrastructure and data usage, and led to enhanced risk management, analytics, and customer service tools.

It also made the parent company confident enough to permit access to the broader SBI client base, which encompasses some 500 million individual customers. SBI Card sourced only 35% of its customers from SBI at the time of Carlyle’s investment; within two years, it was 57%. This was achieved without relinquishing industry leadership in terms of open-market customer sourcing, resulting in a significantly larger – and diversified – pipeline.

The number of new cards issued increased from 950,000 in financial 2017 to 2.3 million in the 2020 financial year. The company now serves 10.5 million cardholders, roughly 45% of which were sourced from open market and co-brand channels, with the rest coming from SBI.

SBI Card claims to have invested heavily in technology, introducing digital credit card applications and a data lake that serves as an end-to-end analytics platform facilitating real-time, location-based customized offers to cardholders. Products now include an e-credit card with an instant generation of virtual credit and electronic PIN, so customers can start online transactions before their physical cards arrive.

Revenue rose 32% during the 2020 financial year to about $1.3 billion. Net profit was up 44% to about $170 million.

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• Topics
• South Asia
• Open market
• Financials
• India
• The Carlyle Group
• Financial Services