Carlyle makes 8.5 times windfall gain in SBI Cards

Marquee US private equity fund, Carlyle Group, which acquired a 26 per cent stake in SBI Cards from the GE group, has made a windfall gain of 8.5 times in 3 years.

The share-holding in SBI Cards before the ongoing IPO was 74 per cent with the State Bank of India and 26 per cent with Carlyle group through its subsidiary CA Rover Holdings.

Carlyle Group had bought 26 per cent share of SBI Cards from a GE group company at Rs 2,000 crore.

After the IPO, the share-holding in the company will be 70 per cent SBI as the bank is diluting its shares. The share-holding of Carlyle will be now at 16 per cent as it is also diluting its shares and 14 per cent will be the new shareholders.

At the issue price of Rs 750-755, the company's market cap will be Rs 71,000 crore. Analysts say that assuming if the Carlyle Group is also diluting the same percentage of shares as of the SBI, the worth of the group's shares will be approximately Rs 17,500 crore.

This would mean a windfall gain for Carlyle group as in just 3 years, Rs 2,000 crore has become Rs 17,000 crore, which is a 8.5 times return.

In the SBI Cards issue, there are two components. In the IPO, the money raised goes to the company, on the balance sheet while in the Offer for Sale, the money raised goes to promoters/early investors bank account.

In the Rs 9,000 crore SBI Cards issue, the fresh issuance (IPO) is Rs 500 crore. So, out of Rs 9,000 crore proposed raise, only Rs 500 crore will go to the company.

The rest of the amount, approximately Rs 8,500 crore via Offer for Sale, which means around 95 per cent of the money raised via this IPO process, will be taken home by the SBI and the Carlyle Group.

The Carlyle Group will be taking home approximately Rs 7,000 crore home. So, with the Rs 2,000 crore investment, they will make Rs 7,000 crore now and still hold 16 per cent shares of this currently valued Rs 70,000 crore company. That totals to another approximately Rs 10,000 crore worth of shares.

Analysts are making the point that the retail investors of the SBI are not even making even one-tenth of what Carlyle Group is making.

They add that the need of the IPO is not to raise money for business expansion but to give exit to the Carlyle group with a handsome profit. IANS