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SBI board approves IPO for credit card subsidiary

SBI Card is a joint venture between SBI and alternative asset manager Carlyle Group.

State Bank of India (SBI) on Wednesday said it has received in-principle approval from its central board to list SBI Card, its credit card subsidiary.

SBI Card is a joint venture between SBI and alternative asset manager Carlyle Group. Carlyle holds 26%, while SBI holds 74% stake in the joint venture. With a customer base of over 7.5 million, SBI Card is the second largest credit card issuer in India after HDFC Bank.

“Pursuant to the applicable provisions of the SEBI (LODR) Regulations, 2015 we advise that the Executive Committee of Central Board of the Bank at its meeting held today has given in-principle approval to explore the possibility of diluting SBI’s stake in SBI Cards & Payment Services Private Limited, a subsidiary company through IPO route at an opportune time, subject to the approval of RBI and other regulatory agencies in this regard,” the country’s largest lender told the stock exchanges.

In June this year, Dinesh Kumar Khara, managing director – global banking and subsidiaries, SBI, had told FE that the National Company Law Tribunal (NCLT) had approved the merger of the front-end and back-end companies of SBI Card and this cleared the decks for its initial public offer (IPO). “The NCLT has approved their merger and we expect to close it by July-end and then we will actively consider taking it public,” he had said.

As per SBI Card’s annual report for 2017-18, the company posted a net profit of Rs 363 crore, down from Rs 390 crore in the previous year. Its income for the year stood at Rs 5,144 crore, up 53% from FY17. During the year, the company grew its new accounts by 104% y-o-y.

In a May 2018 interview, Hardayal Prasad, MD and CEO, SBI Card, had told FE that 10-15% of the customers the company sources are new-to-credit. Much of this comes from Tier-2 and Tier-3 cities. “We see about 40% of all our transactions and 45% of spends coming from beyond the top 10 cities. In the last one year, growth in transaction volumes from these cities has been around 60%, while spends have grown 70%,” Prasad had said, adding that the delinquency rate moves between 2.2% and 2.3% for SBI Card as well as for the industry.

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Source: Financial Express