SBI Card raises ₹700 crore from banks, including parent bank to fund growth

Mumbai: SBI Cards and Payment Services Pvt Ltd. (SBI Card), the credit card subsidiary of State Bank of India, has raised700 crore from a clutch of banks and financial firms including its parent in the last two quarters of FY19 as it targets to grow above industry average.

According to documents seen by Mint, it has raised 100 crore from ICICI Securities Primary Dealership Ltd., 250 crore from State Bank of India, 50 crore from Canara Bank and 50 crore from Axis Bank by issuing non-convertible debentures (NCDs)at 9.15% coupon.

The company also raised another 250 crore from Axis Bank in the form of NCDs at a coupon of 9.55%.

Hardayal Prasad, MD & CEO, SBI Card said in an emailed response that the company will leverage the strong customer base of SBI for acquisition of accounts. “Now, we are also tapping the vast SBI customer base through Project Shikhar under which we are offering pre-approved cards to eligible SBI customers. We believe that this will significantly drive new card acquisition,” said Prasad.

According to the latest Reserve Bank of India (RBI) data, as on February 2019, HDFC Bank was the market leader in terms of number of outstanding credit cards at 12.48 million. SBI Card is over 4 million cards behind the private sector lender at 7.9 million outstanding cards in the same period. ICICI Bank and Axis Bank have 6.4 million and 5.7 million cards, respectively. While HDFC Bank’s market share is at 27.1%, SBI Card’s market share stood at 17.3%.

“We have been able to maintain a sharp focus on our business that has resulted in increased card acquisition rate of over 2.5- 3 lakh cards per month currently from 1 lakh cards per month in December 2016,” said Prasad.

This 700-crore fund raise is part of its plan to raise 1,500 crore in a few tranches. Asked about the plan to raise the remaining 800 crore, he declined to give specifics and said, the company “may raise the remaining amount as per business requirement and suitable market conditions”.

That apart, it has also availed a 1,500 crore working capital line from Central Bank of India as part of its 14,000 crore aggregate working capital limit. The rest is from SBI, the lead banker of the consortium ( 11,000 crore) and Canara Bank ( 1,500 crore). According to documents, the deed for this working capital facility was signed on 10 January, 2019 after being sanctioned by Central Bank of India on 6 December, 2018.

“SBI Card is witnessing a tremendous growth phase and we will continue to evaluate new partnerships to support our business growth plans to sustain this momentum,” added Prasad.

RBI’s data also showed that between February 2018 and February 2019, SBI Card has grown its outstanding cards by 31.8%, HDFC Bank’s credit card growth was at 18.41, albeit on a higher base. In absolute terms, while SBI Card added 1.93 million cards over the last one year, HDFC Bank added 1.94 million cards.

As per its website, SBI Card was launched in October 1998 by the State Bank of India and GE Capital and incorporated as SBI Cards and Payment Services Pvt Ltd. In December 2017, SBI and The Carlyle Group acquired GE Capital’s stake in the joint venture — SBI now holds 74% while Carlyle holds 26% in the joint venture.