IndusInd to buy Bharat Financial; merger to be over in 10 months

Mumbai: IndusInd Bank on Saturday said it will acquire country's largest microfinance player Bharat Financial Inclusion Ltd (BFIL) and the transaction is expected to be completed in the next 10 months.

This would be the largest merger and acquisition in the microfinance space. Announcing the merger, IndusInd Bank Managing Director Romesh Sobti said BFIL's shareholders will receive 639 shares of IndusInd for every 1,000 shares of the microfinance major.

The merger will be effected through an all-stock transaction of BFIL into IndusInd through a Composite Scheme of Arrangement, he said. The merger will not only expand the balancesheet size of the bank but also increase the network of outlet. Post merger, the new entity will have 4,000 branches and outlets and 16 million customers.

"The merger is expected to be value accretive from inception given IndusInd Bank's lower cost of funds, ability to monetise excess priority sector lending qualifying assets, efficient capital utilisation and optimal resource utilisation," he said, adding, the merger would bring down the cost of fund by 3-4 per cent for the combined entity.

With regard to the workforce, he said, all the employees of BFIL will become part of the bank's family and not a single employees would be replaced. The board at its meeting today approved a composite scheme of arrangement among BFIL, IndusInd Bank and a wholly owned subsidiary of the bank to be incorporated for the purpose of acquisition.

The scheme is subject to the approval of the Reserve Bank of India, the Competition Commission of India, the Securities and Exchange Board of India, among others. Sobti said,

"We have regulatory filings and approvals which could be between 2 and 3 months...filing of scheme with NCLT (National Company Law Tribunal) and the whole process would be 9-10 months."

The appointed date for the composite scheme is January 1, 2018. The business correspondent activity would be transferred as a going concern from the bank to a wholly owned subsidiary.

Last month, both the entities had initiated talks to explore the possibility of merger. BFIL, formerly SKS Microfinance, had a customer base of 68 lakh and loan portfolio of Rs 7,709 crore as of June 30.

However, the microfinance company suffered a loss of Rs 37 crore for the quarter to June as against Rs 236 crore in the same period a year ago. For 2016-17, the company had recorded a profit of Rs 290 crore.