SG Private Equity (SG PE) has agreed to invest 50 billion won ($43 million) in Socar Inc in a deal that valued the South Korean car-sharing company at more than 1 trillion won, industry sources said.

The investment will be made out of the Seoul-based firm’s third blind-pool fund, which raised 500 billion won earlier this year.

SG PE cited Socar’s high growth potential and improved profitability as reasons for its investment. The company’s preparation for an initial public offering by the end of 2023, had an impact on SG PE’s investment decision, according to sources.

Socar, founded in 2011 with 100 cars, now has a fleet of more than 12,000 vehicles. Revenue grew to 256.6 billion won in 2019, a twentyfold increase from five years ago, with a membership of more than six million. The company also reportedly turned profitable for a short period earlier this year.

“It is notable that Socar has continued seeing growth despite the Covid-19 pandemic,” an official at SG PE said. “Hours of use of the company’s services are also on the rise.”

The investment valued Socar at about 1.1 trillion won, a more than 12% increase in less than six months. It raised 50 billion won from investors including SoftBank Ventures and LB Private Equity in February at a valuation of 980 billion won.

SG PE’s aggressive approach to the company’s valuation has raised eyebrows, particularly given that Socar stopped its ride-hailing services Tada Basic, one of its key growth drivers, earlier this year. This came after the National Assembly passed a bill targeting the company in March following a protest by taxi drivers against such services.

The move also appears not to be consistent with SG PE’s previous investment decisions, which prioritized protecting downside risk, industry watchers said.

“I understand Socar has a growth potential but its value still looks excessive,” an investor said. “I was surprised at this investment, especially because of lack of protection against downside risk, which is unusual for SG PE.” (Reporting by Se-hun Jo)