Bank of Baroda’s credit card arm Bobcards to raise equity capital
Mumbai: Bobcards Ltd, a Bank of Baroda Ltd subsidiary that deals in credit cards, is seeking to appoint investment banks to explore raising equity capital and other strategic options, according to a request for proposals on the company’s website.
The company is involved in the businesses of credit cards, merchant acquisition and back end support for debit cards operations to Bank of Baroda. Bobcards Ltd was incorporated in 1994 and is the first non-banking company in India issuing credit cards, according to its website.
According to the document dated 3 May, the company is looking to empanel at least three investment banks to advise it on various strategic options including raising equity capital.
“The company invites technical proposals for empanelment of investment bankers...with experience and expertise in handling equity capital market issues, such as but not restricted to qualified institutional placement, offer for sale (OFS), institutional placement programme, differential voting rights shares (DVRs) and other offers related to equity capital raise,” according to the document.
The company, however, did not disclose the quantum of stake it plans to divest or the amount it is seeks to raise.
Bobcards also plans to explore other strategic options such as joint ventures or strategic partnerships.
Bobcards also wants the chosen banker to “provide advice to the company on the nature, modalities and other related aspects of any proposed joint ventures, related business acquisitions, partnerships and strategic alliances, if and as deemed necessary by the company, with the objective of maximizing returns and benefits to the company,” the document said.
Interested banks have been requested to submit their proposals by 5 June.
Emails sent to Bank of Baroda on Monday evening were not answered till the time of going to press.
Bobcards’ plans come at a time when the stake sale in SBI Card, the credit card joint venture between the US-based GE Capital Corp. and India’s largest lender State Bank of India (SBI), has reached the final lap.
On 22 March, Mint reported that global private equity firm Carlyle Group has emerged as the front-runner for GE Capital’s stake in SBI Card. Carlyle is expected to buy GE Capital’s stake for around $325 million, Mint reported.
Apart from Carlyle, other interested bidders include American private equity firm Warburg Pincus and Japanese financial services firm Credit Saison.
Bobcards itself has sought to sell equity stake to a strategic investor in the past.
In 2010, Bank of Baroda had entered into an agreement with Spanish Bank BBVA (Banco Bilbao Vizcaya Argentaria) to sell 51% stake in the Bobcards. The Spanish bank, however, backed out of the deal in 2012, citing a change in its business strategy.
The plans to explore fund raising also comes post Narendra Modi government’s demonetization move in November, when the government scrapped high denomination notes of Rs500 and Rs1,000. The move is expected to boost cashless transactions and card usage.
Bank of Baroda’s debit cards business, for which Bobcards provides back end support, has seen the number of outstanding debit cards grow by 14.3% to 43.22 million from October to March, according to data from the Reserve Bank of India. Bank of Baroda debit card usage at point of sales terminals doubled in the same period, with customers using their debit cards for transactions worth Rs905.6 crore in March, as against transactions worth Rs451.2 crore in October.