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The board of directors of IndusInd Bank on Monday entered into a ‘confidentiality, exclusivity, and standstill agreement’ with Bharat Financial Inclusion to evaluate a potential merger between the two companies.
The development comes in the backdrop of reports in the media over the past year of microfinance company Bharat Financial Inclusion (formerly known as SKS Microfinance) being on the block. Various suitors, including IndusInd Bank, RBL Bank, Kotak Mahindra Bank, and IDFC Bank, were being talked about as being interested in acquiring BFIL.
IndusInd Bank, in a notice to stock exchanges, said its management has been authorised to explore strategic opportunities for the expansion of its business and to assess the viability of strategic partnership, collaboration, or restructuring opportunities.
The potential transaction would be subject to due diligence, agreement on the appropriate transaction structure, definitive documentation, and board, shareholders, regulatory, National Company Law Tribunal, and other third-party approvals, as applicable.
BFIL too notified the stock exchanges that it has entered into an exclusivity agreement with IndusInd Bank for agreeing to have a discussion with the latter about the proposed potential strategic combination by way of amalgamation through a scheme of arrangement, or any other suitable structure.
If the merger goes through, then IndusInd Bank will have access to BFIL’s 1,400-odd branches in 17 States and 68 lakh loan customers. As at June-end 2017, BFIL, which is India’s second-largest microfinance company, had a gross loan portfolio of ₹9,631 crore.
As of June-end, IndusInd Bank had a network of 1,210 branches and 2,090 ATMs. The private sector bank’s total deposits and advances amounted to ₹1,33,673 crore and ₹1,16,407 crore, respectively. The proposed amalgamation move is in line with the trend of private sector banks acquiring microfinance companies to increase their outreach.
Other mergers In line with the strategy of serving the mass market, particularly the underserved, IDFC Bank last year acquired Grama Vidiyal Micro Finance (GVMFL). GVMFL, now renamed IDFC Bharat, is a wholly-owned subsidiary of IDFC Bank. GVMFL had 319 branches, an active customer base of about 10 lakh and has been fully integrated into the bank as a Business Correspondent.
Similarly, last year, Kotak Mahindra Bank executed an agreement to acquire 99.49 per cent of the equity shares of Bengaluru-based BSS Microfinance Pvt Ltd from existing shareholders. The acquisition is for an aggregate all-cash consideration of ₹139.2 crore. The transaction is expected to be closed in the current quarter.
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