SBI, Coface in race for Global Trade Finance stake

State Bank of India (SBI) and Coface, a global credit insurance and factoring company headquartered in Paris, have been short-listed for buying 52.5% stake in India's leading factoring company Global Trade Finance (GTF).

The winner will be short-listed in a week's time, and the deal is likely to close by January-end. 

The promoters of GTF, Export-Import Bank of India (Exim) and IFC (Washington), had decided to sell their stake some months back.
Exim and IFC currently hold 40% and 12.5% stake, respectively.

The other shareholders are FIM Bank, Malta with a stake of 38.5% and Bank of Maharashtra (9%). 

A host of private equity players, foreign banks and public sector banks had evinced interest in buying stake in GTF. Investors who had submitted expression of interests (EoIs) were JP Morgan Financial, GE Financial, Warbug Pincus, Actis (a private equity fund), Standard Chartered Bank, State Bank of India and Coface. 

Exim and IFC will sell their stake to the final short-listed player between Rs 80-110 per share. The total equity of GTF is 7.7 crore shares. At Rs 110 per share, the deal values GTF at  Rs 847 crore.

Asked why IFC is disinvesting its stake, an official said:  "IFC had made it clear when it had entered the joint venture that it will exit through an IPO or sale to a strategic investor after five years of operations. This is the strategy adopted by IFC in other countries as well, and the money is reinvested in the same country in another business.

"Exim also feels it has played the developmental role in GTF. Besides, the bank faces difficulty in providing capital as it needs the board and governement approval. It is now looking at unlocking value."

GTF had reported a net profit of Rs 28.87 crore in FY07, a YoY increase of 171%.

According to estimates, factoring is a $1.3 trillion business globally but just $2 billion in India. The annual growth rate of factoring is 30%, and industry observers see it growing at 50-60% in the next five years.

The other players in the factoring business include SBI Factors and Commercial Services, CanBank Factors, Foremost Factors, CitiBank NA, HSBC, and the government-owned Export Credit Guarantee Corporation.