IndusInd Bank will acquire country's one of the largest microfinance players, Bharat Financial Inclusion ltd (BFIl), and the transaction is expected to be completed in the next 10 months. The Board of Directors of IndusInd Bank ltd and BFIl on Saturday approved the merger deal of two companies through a composite scheme of arrangement, according to IndusInd Bank.
The proposed merger is subject to the approval of the Reserve Bank of India (RBI), Competition Commission of India (CCI), the Securities and Exchange Board of India (Sebi) soon.
However, it is expected that this would be the largest merger and acquisition in the microfinance space. As per the merger terms, it would be share-swapping deal between the firms where shareholders of Bharat Financial will receive 639 shares of IndusInd for every 1,000 shares of BFIl. This implies a premium of 12.6 per cent to BFIl over two-week volume weighted price. The appointed date for the composite scheme is January 1, 2018.
“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,” IndusInd Bank Managing Director Romesh Sobti said while announcing the merger, adding that the merger will not only expand the balancesheet size of the bank but also increase the network of outlet.
Post merger, he added, the new entity would 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 further said, all the employees of BFIl will become part of the bank's family, and not a single employee 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.
Besides all regulatory approvals, Sobti, however, 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.”
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.
Post-merger IndusInd will have over 3,600 banking points (excluding ATMs). “It is a matter of immense pleasure that BFIl has taken today its first steps to be a part of a larger banking family. The transaction will bring immense benefits to Bharat Financial Inclusion's vast customer base, staff and shareholders,” BFIl Chairman PH Ravikumar was quoted as saying in the statement.