IndusInd Bank, Bharat Financial explore merger

Private sector lender IndusInd Bank is exploring the possibilities of a merger of microfinance firm Bharat Financial Inclusion Ltd (BFIL) in a move that would help it expand operations and reach.

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 on the two lenders.

Bharat Financial Inclusion (earlier known as SKS Microfinance), India's second-largest microfinance, been on the block for quite some time and there were reports of several suitors, including IndusInd Bank, RBL Bank, Kotak Mahindra Bank, and IDFC Bank, showing interest in acquiring BFIL.

IndusInd Bank said in a notice to stock exchanges that 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.

Any deal would be subject to due diligence, agreement on the appropriate transaction structure, definitive documentation, and approvals by the board, shareholders, regulators, National Company Law Tribunal, and other third-party stakeholders, it added.

BFIL also informed the stock exchanges that it has entered into an exclusivity agreement with IndusInd Bank for a discussion on a 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 68,00,000 customers.

As of end-June 2017, BFIL had a gross loan portfolio of Rs9,631 crore.

As of end-June, IndusInd Bank had a network of 1,210 branches and 2,090 ATMs. The private sector bank's total deposits and advances amounted to Rs1,33,673 crore and Rs1,16,407 crore, respectively.

Private sector banks with relatively smaller capital have been trying to expand operations through acquisition or mergers of smaller lenders like microfinance firms.

IDFC Bank had last year acquired Grama Vidiyal Micro Finance (GVMFL). GVMFL, which had 319 branches and an active customer base of about 1 million, has been fully integrated into IDFC Bank. Renamed as IDFC Bharat, it is a wholly-owned subsidiary of IDFC Bank operating as a business correspondent

Similarly, Kotak Mahindra Bank also last year agreed to acquire 99.49 per cent of the equity shares of Bengaluru-based BSS Microfinance Pvt Ltd from existing shareholders in a deal estimated to be worth Rs139.2 crore. The transaction is expected to close by the end of this month.