Carlyle continues to sell stake in SBI Cards and continues to add to the booty

Carlyle is set to divest another 3.4% stake in SBI Cards and will now be left with just 3.1% stake in the Company. The sale will happen in the price band between Rs 1,021–Rs 1,072.3 per share (closing price as on September 20, 2021 was Rs 1,072.3)

Key points to note –

  • SBI Cards was originally formed as a JV between State Bank of India (SBI) and GE Capital in 1998.
  • In December 2017, GE Capital exited the venture as a part of it’s global strategy to exit financial services sector. GE’s 40% stake was acquired by SBI and Carlyle – 14% by SBI and 26% by Carlyle.
  • Carlyle invested about Rs 2,000 crore to acquire 26% stake
  • The Company was taken to IPO in March 2020 and right since then Carlyle has been gradually pairing it’s stake.
    • In March 2020 IPO – 10% for about Rs 6,000 crore
    • In March 2021 – 4.25% for about Rs 3,940 crore
    • In June 2021 – 5.1% for about Rs 4,800 crore
    • Now in September 2021 – 3.4% for minimum of Rs 3,267 crore

Post current sale, Carlyle’s balance stake of 3.1% will be worth another Rs 3,000 crore.

Adding above, Caryle’s Rs 2,000 crore investment in December 2017 has yielded a total of > Rs 21,000 crore i.e., 10.5x

Without doubt, it’s one of the most lucrative result for the Indian private equity industry especially for this size of investment and that too in less than 4 years.

Some other key points to note on SBI Cards –

  • The stock is currently trading at a trailing P/E multiple of > 100x
  • Gross NPAs stood at 3.91% as at June 2021 compared with 1.35% as on June 2019. The increase is attributed to Covid.
  • Reported net profits increased from Rs 293 crore in FY 2014 to Rs 1,245 crore in FY 20 but have declined to Rs 985 crore in FY21. The decline is again attributed to Covid. It’s also important to mention here that from FY 2014 to FY 2016, Company’s profits were flat and all the growth seems to have happened in between FY 2017 to FY 2020. Carlyle definitely seems to have entered at just the right time and may have just exited at the right time too !

I personally believe, Caryle would not regret the decision to exit.

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